Eli Dourado

How much carbon does it take to keep Ben Bernanke alive?

Everyone seems to be worried about Bitcoin’s carbon footprint lately. Last week, an article on Quartz claimed that Bitcoin miners are spending $17 million per day on electricity in order to reap $4.4 million worth of bitcoins. And Yesterday, Pando Daily ran a piece that ominously warned about Bitcoin’s carbon footprint.

One problem with both of these pieces is that they seem to rely on electricity consumption estimates from blockchain.info. While this site is great for getting stats about the Bitcoin network, it’s not such a great site for estimating electricity consumption. Blockchain.info clearly states that it is using an estimate of 650 Watts per gigahash [per second, I assume] in its electricity calculations. While this may have been a good estimate of the efficiency of the Bitcoin network when the page was first created, the network has become much more efficient since then. Archive.org shows that the 650W/GH/s figure was used on the earliest cached copy of the page, from December 2, 2011; yes, that is over two years ago.

Furthermore, we can use data from current-generation mining hardware to see how absurd the 650W/GH/s number is. In recent months, the Bitcoin network has mostly switched to application-specific integrated circuits, or ASICs. These devices are much more efficient at mining than previous generations of hardware. A look at this table of mining hardware shows that ASICs all seem to mine at less than 10W/GH/s. Some discontinued models seem to mine as efficiently as 2W/GH/s, and some models that are shipping next year will use less than 0.5W/GH/s. Not everyone in the Bitcoin network is using the latest-generation models of ASICs, and of course botnet mining is based on stealing electricity, so it’s not likely that the network averages 2W/GH/s or less. Nevertheless, it seems that the electricity estimates that these articles are based on may be off by a factor of close to 100.

Furthermore, we should always ask “compared to what?” Yes, the Bitcoin network uses a lot of electricity, but the computations that use this electricity are used to clear transactions, move money around the blockchain, increment the money supply, etc. In order to make a fair comparison to non-cryptocurrency payment systems, we need to ask how many resources (and how much carbon) is used to keep those systems going. And I think the answer is quite a lot. Banks, too, use computers, sometimes ancient ones, to process transactions. Furthermore, humans use a lot of carbon. Since our financial system uses a lot more human intervention than Bitcoin, much of those humans' carbon use is due to the financial system. (Another way to put this is that if we all switched to cryptocurrency, those humans would get other jobs and produce other social benefits in exchange for the carbon used to keep them alive.) And there are of course costs of physically moving cash around, for example on armored trucks.

The relevant calculations are admittedly difficult, but it seems quite possible to me, when all is accounted for, that Bitcoin is the green alternative to Federal Reserve Notes. Cryptoanarchy and the environment don’t have to be enemies.