It is estimated that bitcoin mining will consume nearly 300 billion kwh in 2024 From Chinese Academy of Sciences & Tsinghua University

The following is the It is estimated that bitcoin mining will consume nearly 300 billion kwh in 2024 From Chinese Academy of Sciences & Tsinghua University recommended by And this article belongs to the classification: Blockchain, Bitcoin.

As bitcoin (BTC) is widely recognized around the world, the value it represents has gone up by leaps and bounds. Today, 1 BTC can be converted into “real gold and silver” of about $58154. Moreover, theoretically, there are only 21 million bitcoins of such value, and the number is very limited, which attracts more and more individuals and teams to spend a lot of resources to “dig” this “digital gold”.

By simple analogy, this process is like gold mining. Many bitcoin “miners” or “mines” continuously “mine” through the “cryptocurrency miner” throughout the year to obtain bitcoin wealth.

However, behind this wealth code, the power consumption of bitcoin miner is amazing. According to a bitcoin power consumption index published by Cambridge researchers, if bitcoin is regarded as a country, its power consumption is enough to rank in the top 30 in the world. At present, the annual power consumption of “mining” activities is about 121.36 TWH (TWH, 1 TWH is 10 It is beyond people’s imagination that unless the price of bitcoin falls sharply, the power consumption will only increase.

So, in China, what is the power consumption caused by the operation of bitcoin blockchain and the current and future carbon emission model? On this issue, a team of experts from the Chinese Academy of Sciences and the Department of earth system science of Tsinghua University and their collaborators have carried out modeling and analysis, and the relevant papers have been published in the scientific journal Nature communications on April 6.

Figure carbon emissions and sustainability policy assessment of China’s bitcoin blockchain operation (source: nature Communications)

The study found that without any policy intervention, the annual energy consumption of bitcoin blockchain in China is expected to reach the peak in 2024, about 29659twh, and generate 1305 million tons of carbon emissions, which is among the top 10 in 182 cities and 42 industrial sectors in China. In addition, the researchers also compared the carbon emission level control policies and measures of special currency mining.

Craziness driven by wealth

In recent years, the model based on system dynamics (SD) has been widely used to estimate the carbon emission flow of a specific field or industry. On this basis, researchers have developed the bitcoin blockchain carbon emission model (bbce) to evaluate the carbon emission level of China’s bitcoin network operation under different scenarios.

They established the system boundary and feedback loop of bitcoin blockchain carbon emission system as the theoretical framework for studying bitcoin blockchain carbon emission mechanism. Generally speaking, bbce model consists of three subsystems: bitcoin blockchain mining and trading subsystem, energy consumption subsystem and carbon emission subsystem.

Figure bbce modeling flow chart (source: nature Communications)

In the process of “mining”, when blocks are officially broadcast to bitcoin blockchain, in order to improve the probability of digging out new blocks and getting rewards, miners will invest more computing power (also known as hash rate) in mining, which will lead to the increase of computing power of the whole bitcoin network. Because the energy consumption in the process of bitcoin mining is determined by the network energy consumption and the average electricity price, it will in turn affect the dynamic behavior of bitcoin miners.

Bbce model collects the carbon footprint of bitcoin miners in coal based energy and water-based energy regions to develop the overall carbon emission assessment model of China’s bitcoin industry. Among them, the variable GDP level is composed of the profit rate and total cost of bitcoin miners, which reflects the cumulative productivity of bitcoin blockchain. In this study, it also serves as an auxiliary factor to generate carbon emissions per unit of GDP, providing guidance for policy makers to implement punitive carbon tax compared with tecoin mining.

Bitcoin blockchain rewards are halved every four years, which means that by 2140, the rewards for broadcasting new blocks in bitcoin blockchain will be zero. Therefore, due to the halving mechanism of bitcoin blockchain, the market price of bitcoin will rise periodically. Finally, by combining carbon cost and energy cost, the total cost of bitcoin mining process provides negative feedback for miners’ profit margin and investment strategy. When mining profits become negative in the bbce simulation, miners will gradually stop mining in China or move to other places.

Based on the benchmark simulation of bbce model, the annual energy consumption of China’s bitcoin industry will reach a peak of 296.59 TWH in 2024, which is higher than the total energy consumption level of Italy and Saudi Arabia. If it is placed in the list of carbon emissions of all countries in 2016, it will rank 12th; accordingly, the carbon emissions of bitcoin business will reach 1.3050 TWH per year in 2024 100 million tons.

In China, the emissions of bitcoin mining industry will rank in the top 10 among 182 prefecture level cities and 42 major industrial sectors, accounting for 5.41% of China’s power generation emissions. The largest carbon emissions per capita GDP of the industry will also reach 10.77 kg / US dollar.

Although the proof of work (POW) consensus algorithm enables the bitcoin blockchain to operate in a relatively stable way, the attractive wealth incentive has led to the continuous escalation of the arms race based on different camps of professional bitcoin mining machines.

Figure carbon footprint of bitcoin blockchain proof of work algorithm (source: nature Communications)

At first, miners were able to mine even on a general-purpose computer using a conventional central processing unit (CPU); later, a graphics processing unit (GPU) was also used to mine, which provided more power than the CPU Higher power and computing power; at present, large-scale deployment of application specific integrated circuits (ASICs) optimized for hash operation, rapid hardware iteration and fierce mining competition have greatly increased the capital expenditure of bitcoin mining.

The expansion of bitcoin mining activities and the increase of mining machines lead to huge energy consumption, which is equivalent to that of small and medium-sized countries such as Denmark, Ireland or Bangladesh, which indirectly leads to huge carbon emissions. It is estimated that up to 13 million tons of CO2 emissions from January 1, 2016 to June 30, 2018 can be attributed to the bitcoin blockchain.

Especially in China, due to the professional mining machine manufacturers and cheap power supply, most of the mining processes are carried out in China, and the computing power from Chinese mines accounts for more than 75% of the whole bitcoin network.

Figure distribution of ore pools in bitcoin blockchain (source: nature Communications)

However, as one of the world’s largest energy consumers, China is a major signatory to the Paris Agreement. Without proper intervention and feasible policies, China’s intensive bitcoin blockchain mining activities may quickly become a pressure to interfere with China’s efforts to reduce carbon emissions.

Development trend under different policy scenarios

According to the subsystem composition of the bbce model, the researchers considered three main bitcoin policies implemented in different stages of bitcoin mining, and then formulated four scenarios of carbon emission assessment of bitcoin blockchain.

Figure scene parameter setting (source: nature Communications)

In the benchmark scenario (BM), market access is assumed to be 100%, which means that all efficient profitable bitcoin miners / miners are allowed to operate in China. Based on the actual regional statistics of bitcoin miners / miners, the researchers assumed that 40% of the miners in the benchmark scenario were located in coal power generation areas.

In the other three cases, the policies of different bitcoin mining procedures are adjusted for the sake of energy conservation and emission reduction.

Specifically, in the bitcoin mining and trading subsystem, the market access standard has been doubled, that is, under the market access (MA) scenario, inefficient profitable miners are forbidden to enter China’s bitcoin market, while policy makers are forced to maintain the network stability of bitcoin blockchain in an efficient way.

In the site improvement (SR) scenario, the bitcoin miners in the coal mine power generation area are advised to move to an area rich in water resources to take advantage of the relatively low energy availability cost of the area due to factors such as rainy season.

In the carbon tax scenario (CT), the carbon tax is increased to twice the initial value to impose a more severe punishment than the high carbon emission behavior of tecoin blockchain.

Using the above scenarios, the researchers evaluated the carbon emission flow and energy consumption of the special currency blockchain, and evaluated the carbon and energy emission reduction effects of different policies in the bbce simulation from 2014 to 2030.

As a result, without any policy intervention, the carbon emission model of bitcoin blockchain will become an obstacle to China’s sustainable development efforts. It is estimated that the peak annual energy consumption and carbon emissions of China’s bitcoin blockchain will exceed those of some developed countries such as Italy, the Netherlands, Spain and the Czech Republic. As the baseline assessment under the minimum policy intervention, the benchmark scenario simulates the natural operation results of bitcoin blockchain network.

Under the BM scenario, in China, the annual energy consumption of bitcoin blockchain will gradually increase, and finally reach the peak in 2024, which is 296.59 TWH per year, indicating that the operation of bitcoin industry will continue to follow the energy intensive mode. For CT scenario, due to carbon emission penalty, the highest energy demand of bitcoin industry slightly decreased to 217.37 TWH; however, the results under Ma and Sr scenarios show that the total energy consumption of bitcoin industry will reach 350.11 TWH and 319.80 TWH in 2024 and 2025 respectively.

In contrast, carbon emissions generated by bitcoin blockchain are significantly reduced in SR and CT scenarios, which shows the positive impact of strict carbon related policies. On the contrary, the Ma scenario witnessed a significant increase in bitcoin’s carbon emissions to 140.71 million tons in 2025.

Figure annual simulation results of different scenarios, annual energy consumption (a) and carbon emissions (b) (source: nature Communications)

Based on the scenario results of bbce model, the benchmark scenario shows that as long as bitcoin mining maintains its profitability in China, the energy consumption and carbon emissions generated by bitcoin industry operation will continue to grow. This is mainly due to the positive feedback loop of the workload proof competition mechanism, which requires bitcoin miners to have advanced and high energy consumption mining machines, so as to increase the probability of winning block rewards. In addition, the carbon emission flow and long-term trend simulated by the proposed system dynamics model are consistent with several previous estimates, which are used to accurately estimate the carbon footprint of bitcoin blockchain.

Researchers believe that in China’s current national economy and carbon emission accounting, the operation of bitcoin blockchain is not listed as an independent department for carbon emission and productivity calculation. This makes it more difficult for policy makers to monitor the actual behavior of bitcoin industry and design targeted policies. In fact, the energy consumption of each transaction in bitcoin network is greater than that of many mainstream financial transaction channels.

To solve this problem, the researchers suggest that policy makers set up separate regulatory accounts for the bitcoin industry in order to better manage and control the carbon emission behavior of the industry in China.

Figure comparison of energy consumption and carbon emissions of bitcoin industry (source: nature Communications)

What management measures are more effective?

Through scenario analysis, the researchers believe that in terms of limiting the total energy consumption and carbon emissions in the operation of bitcoin blockchain, policies leading to changes in the energy consumption structure of mining activities may be more effective than intuitive punishment measures.

During the whole simulation period, the per capita GDP carbon emission of China’s bitcoin industry in BM scenario is larger than that in all other scenarios, with the highest carbon emission reaching 10.77 kg / US dollar in June 2026. However, the researchers found that the policy effectiveness of Ma and conventional CT scenarios in reducing carbon emission intensity is quite limited, that is, the policy effectiveness of market access is expected to decrease in August 2027, while the policy effectiveness of carbon tax is expected to last until July 2024. Among all the expected policy scenarios, Sr shows the best effect, which can reduce the peak carbon emission per capita GDP of the bitcoin industry to 6 kg / US dollar.

Overall, the per capita GDP carbon emissions of bitcoin industry far exceed the average industrial carbon intensity of China, indicating that bitcoin blockchain operation is a high carbon intensive industry.

Figure bbce scenario assessment comparison (source: nature Communications)

Under the BM scenario, the profit margin of bitcoin miners is expected to drop to zero in April 2024, which means that bitcoin miners will gradually stop mining in China and move their business to other places. However, it should be noted that the whole relocation process does not happen immediately. The miners with higher sunk costs often operate longer than those with lower sunk costs and hope to make profits again. As a result, the overall energy consumption associated with bitcoin mining will remain positive by the end of 2030, when almost all miners will move elsewhere.

Accordingly, in BM scenario, the network hash rate is 1775 eh per second, and the total cost of miners can reach up to US $1.268 billion. Comparing the scenario results of the other three policies, it is expected that the profitability of China’s bitcoin mining will deteriorate faster under the CT scenario. On the other hand, bitcoin blockchain can maintain profitability for a long time in Ma and Sr scenarios.

Based on the results of bbce simulation, we can draw some attractive conclusions: Although Ma scheme improves the market access standards and improves the efficiency of bitcoin miners, it actually improves, rather than reduces, the emissions of simulation results. In the Ma scenario, researchers observed the incentive effect phenomenon proposed in previous studies, which is reflected in other areas of industrial policy, such as monetary policy, traffic regulations and enterprise investment strategy.

Essentially, the purpose of market access policy is to limit the mining operations of inefficient bitcoin miners in China. However, this allows miners to stay in the network for a longer time. In addition, in the Ma scenario, China’s bitcoin industry generates more CO2 emissions, which is mainly due to the proof of work (POW) algorithm and the profit seeking behavior of bitcoin miners. The results of Ma scenario show that market access policies may not be very effective in dealing with the high carbon emission behavior of bitcoin blockchain operation.

Carbon tax policy is recognized as the most effective and universal carbon emission reduction policy. However, the simulation results show that the effectiveness of carbon tax is limited. Before bitcoin miners realize that their mining profits are affected by bitcoin mining punitive carbon tax, the carbon emission model of CT scenario is consistent with BM scenario.

On the contrary, the simulation data under SR scenario shows that it can provide negative feedback for the carbon emission of bitcoin blockchain operation. Compared with BM scenario, the maximum carbon emission per GDP of bitcoin industry under SR scenario is reduced by half.

It is worth noting that although the peak annual energy consumption of bitcoin mining industry under SR scenario is higher than that under BM scenario, a high proportion of miners move to areas rich in water resources for bitcoin mining under SR scenario. Therefore, compared with BM scheme, this naturally reduces the related carbon emission cost.

Blockchain Technology

In general, under the intervention of different policies, such as restricting bitcoin mining access, changing miners’ energy consumption structure, and implementing carbon emission tax, the carbon emission intensity of bitcoin blockchain is still far higher than the average emission intensity of China’s industry.

This result shows that bitcoin, as a typical case of blockchain technology, may become an energy and carbon intensive industry in the near future.

However, the blockchain technology behind bitcoin, with its decentralized characteristics and the mode of trust mechanism based on consensus algorithm, still provides a new solution, which is beneficial and innovative to various industrial development and remote transactions. In recent years, blockchain technology has been introduced and adopted by a large number of traditional industries, seeking to optimize its operation process, such as supply chain finance, intelligent contract, international business and trade, manufacturing operation and so on.

It is noteworthy that the people’s Bank of China plans and designs a central bank digital currency (CBDC) based on blockchain technology, that is, digital money electronic payment (DCEP), which is expected to gradually replace China’s current cash in circulation (M0) supply based on paper money in the future. With the wide use and application of blockchain technology, new protocols should be designed and scheduled in an environment-friendly way. This change is a necessary condition to ensure the sustainability of the network. After all, no one wants to see a disruptive and promising technology become a carbon intensive technology that hinders global efforts to reduce carbon emissions. The above trade-off is worth further exploration and research.

Different from traditional industries, the carbon emissions of emerging industries such as bitcoin blockchain operation are lower than the current GDP Without proper audit and supervision, it is quite challenging to use traditional tools such as input-output analysis to evaluate the carbon emissions of these emerging industries. The results of this study also show that the system dynamics model is a promising method to study the carbon flow mechanism of emerging industries.

Google Trends: data show that the search volume of “buy bitcoin with credit card” has reached an all-time high, and the annual power consumption of bitcoin mining is about 29.05twh Bitcoin mining boom in 159 countries around the world: selling equipment may be more profitable than “miners” dia: returns and costs of q1-q3 bitcoin mining machines will reach US $4.7 billion in 2018 Tel Aviv University: research shows that bitcoin has broken 1000 for the first time in its history U.S. dollar is likely to be manipulated by human: Global ICO raised $4.9 billion in 2017 Princeton University: the power consumption of bitcoin mining is close to half of the total global power consumption 1% Morgan Stanley says bitcoin is purely a speculative game. Credit Suisse: data show that 4% of address masters 97% bitcoin. Morgan Stanley: it is estimated that the total power consumption of global digital currency mining in 2018 will exceed that of Argentina. Nearly 75% of top European economists believe that bitcoin is not a systemic financial risk. Coinmarketcap: in November 2017, the total scale of global cryptocurrency exceeded 300 billion US dollar coin market cap: Global cryptocurrency market value evaporates US $557.1 billion in one month in early 2018 JPMorgan: bitcoin’s long-term price may rise to US $146000

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