Is Bitcoin's environmental footprint really that bad?

Bitcoin is known for its high energy consumption. It is often criticised for being wasteful of energy or having a very poor environmental footprint. But is this really true? Could it even be that Bitcoin mining promotes the development of renewable energies? In the following article, we explore these questions.

What is behind Bitcoin Mining?

Bitcoin is a decentralised network without a central authority. It requires a mechanism that incentivises network participants to maintain it. This is where mining, also known as Proof-of-Work, comes into play. It creates consensus without relying on central authorities and is essential for Bitcoin's decentralisation. Mining also protects the network from so-called double-spend attacks, ensuring that Bitcoins cannot be copied and spent twice. Mining requires a "proof of work" in the form of computational power, which in turn requires electricity.

Is Bitcoin a waste of Energy?

It is undisputed that securing the Bitcoin network involves a high energy expenditure. Those who see no utility in Bitcoin consider the energy expended as wasteful. However, those who view Bitcoin as a globally accessible store of value, a hedge against monetary devaluation, or a tool for fast international value transfer may see the energy expenditure as justified. As with many things in life, value and utility are subjective and ultimately in the eye of the beholder.

How eco-friendly is Bitcoin really?

The assumption that Bitcoin's energy consumption mainly comes from fossil fuels persists. Indeed, gas and coal still make up a significant portion of Bitcoin's energy mix. In Kazakhstan, largely state-subsidised coal energy is used. The issue of e-waste production from outdated mining equipment is also a challenge.

However, it is often overlooked that the cryptocurrency is increasingly powered by renewable energy sources. Sustainability statistics for Bitcoin mining show a continuous increase in the use of sustainable energy. By the end of the first quarter of 2024, the share of sustainable energy was nearly 55%.

_{Note on the graphic: Bitcoin performs positively compared to other industries. Source: Batcoinz.com}

How Bitcoin Mining promotes renewable energy

New studies show that Bitcoin can contribute to the promotion of renewable energies. Renewable energy sources like wind or solar power often cannot be efficiently utilised because they are also produced during times of low demand. Efficiently storing this excess energy is currently still very costly. Bitcoin can help here.

  Stabilising the power grid
In Texas, for example, Bitcoin miners help stabilise the power grid by shutting down their mining operations during peak times. During periods of lower general power demand, the mining equipment can be reconnected to the grid. This is possible because Bitcoin production, compared to other industries, can be turned on and off quickly and with little effort. Thus, Bitcoin helps to balance under- and over-utilisation of the power grid, ensuring its stability and increasing its efficiency.

  Utilising heat
The heat generated by mining equipment can be used to heat homes, offices, greenhouses, and swimming pools. This provides miners with an interesting way to reduce their costs.

  Reducing methane gas
The publicly listed Bitcoin miner "Marathon Digital (MARA)" has recently launched a pilot project in which methane gas from landfill waste is used to generate electricity for Bitcoin mining. The company can thus reduce its costs and at the same time reduce the amount of methane gas released. Methane, along with carbon dioxide (CO2), is a significant greenhouse gas. Other Bitcoin miners also monetise this waste product and reduce a greenhouse gas in the process.

Important legal information:

_{This publication is intended for information and marketing purposes only, and does not constitute investment advice or a specific individual investment recommendation. It is not a sales prospectus and does not constitute a request, an offer, or a recommendation to buy or sell investment instruments or investment services, or to engage in any other transaction. Maerki Baumann & Co. AG does not provide legal or tax advice. Investors are therefore advised to obtain independent legal or tax advice concerning the suitability of such investments, since their tax treatment depends on the personal circumstances of the investor in question and is subject to change at any time. ­Maerki Baumann & Co. AG holds a Swiss banking licence issued by the Financial Market Supervisory Authority (FINMA).}

_{This publication is expressly not intended for persons resident in Germany.}

Editorial deadline: 6 June 2024

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