If bitcoin wins, climate loses out: Will a cryptocurrency kill Paris goals?

A report tries to think through the side effects of the dramatic success of bitcoin

If bitcoin were to become a true global transactional currency, the electricity needed to mine it alone would generate enough carbon dioxide to push the planet beyond 2 degrees Celsius of warming within a quarter-century.

The creation of new bitcoin requires immense computational effort, and therefore enormous amounts of energy.  “If this takes off it will be something that we will not be able to control” said Camilo Mora, associate professor at the University of Hawaii and lead author of the analysis published this week in Nature Climate Change.

Mora’s research often uses large data sets to tackle far-off problems. He’s previously drawn attention for projecting how often in the future heat will become deadly, and that, by 2047, cold years will be hotter than today’s hottest years. 

The authors specify that they aren’t predicting the future for Bitcoin, only trying to think through the side effects of dramatic success, said Randi Rollins, a PhD student who studies the impacts of climate change. “This type of analysis should be performed when any new technology is under development,” she said. “Being aware of the consequences of future technology development could go a long way in reducing emissions and preventing further damage to the environment.”

Cryptocurrency is nowhere near mainstream yet. Bitcoin transactions made up just 0.033 per cent of 314 billion cashless transactions globally in 2017, according to the analysis. If adoption proceeds like major 20th century technologies—such as electricity or the dishwasher—then bitcoin could equal all other cashless transactions in 100 years, and eat up the earth’s remaining carbon budget in just two decades. 

Of course, it's unlikely Bitcoin will become as popular as not having to do the dishes. There are currently about 30 million Bitcoin wallet users, according to Blockchain.com, about 10 million more than last December. But most of these people are investors, speculators or those attempting to evade capitol controls and law enforcement; Bitcoin is hardly used in everyday life. In the U.S., cash is still the currency of choice for 60 per cent of small transactions under $10, a figure that drops to 20 per cent for sales of $25 or more, according to the Federal Reserve. 

It would be unfair to compare potential bitcoin adoption with previous consumer-technology according to Michael Wilshire, head of strategy at Bloomberg NEF. Consumer products tend to take off when there’s high unmet demand for a product or service, prices are low enough for widespread affordability and growing adoption makes the product more useful. Given the circumstances, Bitcoin is “a long way from being a universally accepted currency,” Wilshire said. 

Bitcoin is also competing with thousands of other cryptocurrencies, any one of which could dispatch Bitcoin to the technology junkyard along with cassette tapes, wooden tennis rackets and rotary phones. Some of these rivals may not have such a drastic environmental impact. Ethereum, for instance, is working on a model that will make energy-consuming mining unnecessary while still securely recording transactions to the blockchain.

Nearly three-quarters of bitcoin mining occurs in China, where the government early this year began to limit power use for digital currency. Bloomberg NEF in January characterized the move “significant” but pointed out that it “does not end the profitability of bitcoin mining.”