By now, you’ve probably heard about bitcoins, the decentralized electronic currency that’s attracting huge amounts of press and investor speculation. There have been plenty of disagreements about bitcoins’ real-world relevance and longevity, but surely one of the biggest upsides of a purely digital currency is that it has no real-world environmental effects, right? It might appear to be a nonissue, but there’s been a big debate over the damage bitcoins could do to the environment.
According to the headline over an article authored by Bloomberg.com’s Mark Gimein, so-called bitcoin mining is an “environmental disaster” comparable with real-world mining because of the large amount of electricity needed to create new bitcoins. It sounds damning, but there’s a lot of sensationalism here.
Like any digital file, a bitcoin is basically just a string of data, and each bitcoin has a unique code element to set it apart from all the other bitcoins. To create a new bitcoin, high-performance computers work to solve intensive math equations. When a user -- or a group of users pooling their computing power and resources -- solves such an equation, he, she or they are presented with a shiny new bitcoin.
As more and more bitcoins are mined, the actual process of mining becomes more difficult and processor-intensive. Despite the increasing level of processor power involved in creating new bitcoins, bitcoin mining is still a process that requires only computing power to produce the new currency units.
But all that computing power takes energy, which is the primary point of the Bloomberg report. Based on data provided by bitcoin mining tracker Blockchain.info, global bitcoin mining employs about 982 megawatt-hours a day, costing about $147,000 at Bloomberg’s assumed rate of 15 cents per kilowatt-hour. That’s enough energy to power 31,000 U.S. homes for one day. Although that sounds like a ton of energy, it certainly isn’t indicative of an “environmental disaster.”
Let’s look at the figures.
According to Forbes, 31,000 homes is a pretty trivial number in context. In fact, it’s only 0.025 percent of all American households, excluding businesses and industrial centers. By way of comparison, the New York Times reported in 2011 that Google Inc. (NASDAQ:GOOG) alone uses over six times more energy than the global bitcoin mining operation. If bitcoin mining is an “environmental disaster,” then Google’s operation is a massive threat to the continued existence of mankind. But, of course, that isn’t true. (Probably.)
Forbes also brings up another great point in its rebuttal to the Bloomberg report: Eventually, bitcoin mining will cease. After 21 million Bitcoins are created, no more can be mined, thus establishing an effectively limited marketplace, as Ars Technica noted. No matter the (negligible) environmental impact of bitcoins, there is a set limit to the energy they will use.
To call bitcoin mining an “environmental disaster” is an insult to those affected by the real damage that environmental catastrophes can wreak on the planet. In a world where Exxon Mobil Corp. (NYSE:XOM) pipelines are directly polluting neighborhoods and ruining lives, it seems wacky at best to call a moderate increase in worldwide electricity use a disaster.
There may be plenty of valid reasons to discourage the use of bitcoins and bitcoin mining -- indeed, the recent drop in the currency's value might be a big enough reason for most people -- but bitcoins’ environmental impact isn’t one of them.