How Dangerous is the Bitcoin for the Climate Really?
Scientists from RWTH and the Institute for Climate Protection, Energy and Mobility – IKEM have published their research findings on the energy consumption of bitcoins.
Last October a publication in the Nature Climate Change journal caused an international sensation. A US team consisting of seven members, headed by Camilo Mora of the University of Hawaiʻi at Mānoa published an urgent warning regarding the impending failure to meet the international climate policy goal of limiting the global temperature increase to below two degrees Celsius within the next two decades. The research team identified the bitcoin network as the sole cause for this. Their forecast was underpinned by an analysis of the bitcoin’s electricity consumption and associated greenhouse gas emissions.
The US research team’s findings are however controversial. German energy researchers Aaron Praktiknjo, Junior Professor of Energy Resource and Innovation Economics at RWTH and Lars Dittmar from the Institute for Climate Protection, Energy and Mobility – IKEM have now published an article criticizing the analysis by Mora’s team in Nature Climate Change. While the two scientists confirm that the bitcoin network is generally energy-intensive, they claim the results of the US research team are overestimated by several orders of magnitude. In particular, they assert that their assumptions about bitcoin technology and the energy system are simply not tenable.
Mora's team assumes, for example, that in the future, all global electronic payments will be made by bitcoin. Dittmar and Praktiknjo argue however that the bitcoin protocol provides a technical upper limit for the annual number of transactions, which is 500 times too low to allow for global electronic payments. Another assumption that proves equally problematic is that the bitcoin network’s energy consumption would grow in proportion to the number of transactions. The two researchers explain that there is a highly complex system behind the bitcoin's electricity consumption, which essentially depends on the bitcoin rate and electricity costs, but not however on the number of transactions.
Immense Growth Refuted
Further, Dittmar and Praktiknjo also criticized the energy consumption scenarios regarding the bitcoin, which suggest that bitcoin technology would triple global electricity consumption in the next five years. According to Dittmar and Praktiknjo, such rapid growth is unrealistic due to technical restrictions: "The planning and construction of energy infrastructure requires considerable lead times. From an organizational perspective, it would be impossible to triple the energy infrastructure within only five years.” Even the theoretical assumption that such immense growth is technically possible can be refuted for economic reasons. "If global electricity consumption tripled within just five years, this would lead to a price explosion of electricity due to a shortage of resources. A price explosion on this scale would in turn have a dampening effect on the electricity demand – and also when it comes to prospecting for bitcoins."
The researchers’ findings have been published in the Nature Climate Change journal under the title "Could Bitcoin Emissions Push Global Warming above 2°C?”
Source: Press and Communications