Bitcoin Mining Environmental Impact: How Do Bitcoin Miners Mine Bitcoin?

Depending on the person or the CEO, Bitcoin mining and its environmental impact are either nonexistent or the most harmful thing since the atom bomb.

Bitcoin's environmental impact has been a subject of heated debate, especially as the cryptocurrency market continues to boom.

Elon Musk, a known figure in the crypto sphere, has openly discussed his stance on BTC and other cryptocurrencies. For instance, in 2021, Musk announced that Tesla would no longer be accepting Bitcoin payments for its electric vehicles due to the environmental concerns associated with the cryptocurrency's mining activities.

This statement from the billionaire CEO sparked a discussion about the cryptocurrency's energy footprint and whether it was optimal to use the token.

Why Does Bitcoin Need Mining?

Bitcoin is a cryptocurrency that runs on a distributed ledger technology called blockchain. In essence, it's a record of every transaction that is performed with Bitcoin, and it's open for anyone to view.

Miners act as gatekeepers, confirming these transactions and ultimately securing the system. The term "miner" might be a bit of a misnomer; they are more like accountants for the blockchain.

Miners use specialized hardware, known as ASIC miners, to solve complex mathematical problems in order to add new blocks of transactions to the Bitcoin blockchain.

When miners verify 1MB worth of transactions, they are rewarded with Bitcoin for their work. This serves as an incentive for miners to continue securing the network and processing transactions.

Bitcoin operates on a system of verification, not trust. Miners don't personally know each other, but this isn't necessary for the system to function. As long as the incentives are in place, the network continues to be maintained.

With a maximum limit of 21 million coins, 19.9 million Bitcoin are already in circulation. The reward for miners, currently at 3.125 BTC, is halved every four years and is set to decrease again in 2028.

Is Bitcoin Mining Profitable in 2023?

According to the Bitcoin Energy Consumption Index by the Digiconomist, a single Bitcoin transaction consumes an average of 1252 kWh of electricity, which is roughly the same energy used by an average American household over 53 days.

In terms of carbon emissions, a single Bitcoin transaction generates about 668 kg of CO2, which is comparable to the emissions from a round-trip flight between London, UK, and New York City in the US.

To put this into perspective, a single Bitcoin transaction has about the same carbon footprint as 842,000 Visa transactions or 51,210 hours of streaming YouTube.

This begs the question again: Is any of this worth it, or should we scale down a bit on all the Bitcoin mining? Bitcoin is an unprecedented global network of money that has no single source of control. The more miners there are in a network, the more decentralized it is.

Even then the alleged energy consumption for Bitcoin is hyperbolic at best.

Bitcoin's proof of work system is what allows it to function; furthermore, it enables Bitcoin's best feature, decentralization, to work without a hitch. If functional decentralized money is important to you, then Bitcoin is worth it.

What Energy Sources Are Used For Bitcoin Mining?

Earlier this year, ARKK Investment's founder, Cathie Wood, made some interesting points about Elon Musk's assertions regarding Bitcoin mining being bad for the environment.

"The one thing that has changed here is the environmental concerns around Bitcoin, which have caused people like Elon Musk to pull away from it. But we believe even this is going to change, because, first of all, the percentage of Bitcoin mined with renewables and hydroelectric power is quite substantial. In China, I believe it's over 50%."

She went on to add that miners adopt green energy because they go to the locations where power is cheapest, and ultimately, cheaper power leads to more profits for miners.

Despite this, the claims about Bitcoin's environmental impact are often overstated, and it's crucial to consider the broader context. It's also worth noting that new cryptocurrencies with smaller environmental footprints are being developed every day, and Bitcoin is just one cryptocurrency among many.