- Renewable energy sources now account for more than 50% of Bitcoin mining.
- Emissions relative to Bitcoin’s market value have fallen by 75% over the past four years.
Over the years, Bitcoin [BTC] The network’s astonishing growth has gone hand in hand with criticism of significantly increased energy consumption and greenhouse gas emissions. This issue has become a major sticking point between climate activists and Bitcoin maximalists, with the former raising the question: Will Bitcoin production be environmentally sustainable in the long term?
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A unique correlation comes to light
According to Bloomberg crypto market analyst Jamie CouttsA symbiotic relationship emerged between the expansion of the Bitcoin network and the transition to green energy.
As shown in the statistics below, while the network has grown in virtually all key performance indicators (KPIs) of on-chain activities, its carbon footprints have continued to decline, much to the delight of Bitcoin proponents.
Source: Bloomberg Intelligence
This negative correlation was a result of miners’ preference for cheaper and cleaner energy sources to power their mining rigs, according to Jamie Coutts. He said,
“With energy accounting for well over 50% of mining operating costs, the incentive to acquire the cheapest energy sources contributes to the increasing hash rate of the network, while at the same time reducing industry emissions or carbon intensity.”
The demand for sustainable energy is skyrocketing
Over the years, the share of renewable sources, such as hydropower, solar and wind energy, has increased significantly. Coutts highlighted how these renewables are now responsible for more than 50% of Bitcoin mining consumption, citing data from climate tech venture capitalist Daniel Batten.
Source: Bloomberg Intelligence
This remarkable transition could be associated with a geographical shift in mining activities. Countries like China were once the epicenter of BTC mining. However, it ceded its position to the US following a blanket ban on cryptocurrency mining in May 2021.
China, along with other Asian countries such as Kazakhstan, is a region where fossil fuels are heavily subsidized. This incentivized miners to exploit these resources, resulting in a larger carbon footprint.
But now that mining operations have moved to the US, things have changed. The south-central state of Texas has enacted favorable policies and tax incentives to attract miners to its wind and solar energy.
Furthermore, the economic benefits of renewable energy sources cannot be overstated. According to a report from the International Renewable Energy Agency (IRENA), the cost of generating electricity from wind, solar and geothermal sources has fallen sharply in 2022.
By comparison, modern solar photovoltaic (PV) turned out to be 29% cheaper than the cheapest fossil fuel solution in 2022.
Greenhouse gas emissions are declining despite the growth of the network
Another way to analyze the inverse relationship between emissions and network growth was through emissions per market capitalization. As clearly indicated, emissions compared to Bitcoin’s market value dropped significantly by 75%.
Source: Bloomberg Intelligence
The counterargument that could be made here is that Bitcoin’s value has also seen a sharp decline from its 2021 highs. Indeed, BTC was 60% below its all-time high (ATH) at the time of writing. CoinMarketCap facts.
However, the drop in market capitalization has not hindered Bitcoin’s network growth. In fact, a recent update from on-chain analytics firm Glassnode showed that ownership continued to soar to new highs on a daily basis.
???? #Bitcoin $BTC Number of addresses with more than 0.01 coins just reached an ATH of 12,454,017
Previous ATH of 12,453,322 was observed on September 20, 2023
View statistics:https://t.co/oyguxpb7S6 pic.twitter.com/6roEN4EQM5
— Glassnode Alerts (@glassnodealerts) September 21, 2023
As the network has grown in size, there has also been a need for more miners to keep the system secure and decentralized. According to the data cited, Bitcoin’s global hash rate has almost tripled in the past four years.
However, we have yet to see a proportional increase in the carbon footprint.
Source: Bloomberg Intelligence
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Researchers studying Bitcoin’s emissions and energy consumption have made substantial adjustments to their data modeling methodologies over the years.
Recently, the popular portal Cambridge Bitcoin Electricity Consumption Index (CBECI) assessed BTC’s power consumption for 2021 and 2022. This resulted in a significant drop in annual estimates.