Bitcoin’s value has nosedived enough to curb the cryptocurrency’s enormous energy use — and associated greenhouse gas emissions — but only if prices stay low. The price of a single Bitcoin plummeted below $24,000 today, about half of what it was worth in March. While it’s been steadily losing value for months, the sudden tumble in value over the past 24 hours brings the price below a key threshold when it comes to Bitcoin’s impact on the environment.
Since Bitcoin’s price peaked at around $69,000 in November, the network’s annual electricity consumption has been estimated to be between roughly 180 and 200 terawatt-hours (TWh). That’s about the same amount of electricity used by all the data centers in the world every year.
Higher prices generally incentivize more mining since the reward is bigger. But prices don’t have to linger at that peak for Bitcoin to stay energy-hungry. As long as the price stays above $25,200, the Bitcoin network can sustain mining operations that use up about 180 TWh annually, according to research published last year by digital currency economist Alex de Vries.
Prices below that $25.2K threshold could push miners to pause operations or mine less because they don’t want to risk spending more money on electricity than they earn from mining new tokens.
“We’re getting to price levels where it is becoming more challenging [for miners],” de Vries says. “Where it’s not just limiting their options to grow further, but it’s actually going to be impacting their day-to-day operations.”
It’s still too soon, though, to make concrete predictions on whether Bitcoin’s price plummet will ultimately be beneficial for the environment. Sky-high prices last year mean that miners likely have some savings to tide them over for a while. “If this is just a one-day drop, then nothing is going to change,” de Vries says. On the other hand, if prices fail to quickly rebound, miners could be facing some tough decisions ahead.
A sustained price at around $24K could shrink the Bitcoin network’s global energy use to around 170 TWh annually, according to de Vries. That might sound like an incremental change, but it would add up to a significant drop in electricity use and related greenhouse gas emissions. If you compare it to the annualized energy use de Vries estimated Bitcoin was responsible for throughout much of 2022, it would be like shaving off the amount of electricity the country of Ireland uses in a year.
Bitcoin mining is inherently energy inefficient. Miners verify transactions by racing to solve increasingly complex puzzles using specialized hardware and get rewarded with new tokens in return. The built-in energy inefficiency that comes with all that computing is meant to dissuade anyone from deliberately messing up the ledger of transactions. It’s also why Bitcoin has a lot of people concerned about the greenhouse gas emissions the cryptocurrency generates.
Bitcoin is the biggest player in cryptocurrency, so its swinging prices matter most for the environment. But it’s not alone. The second-largest cryptocurrency network, Ethereum, uses the same kind of energy-intensive process to validate transactions on its blockchain and has similarly seen its value plunge recently. So de Vries thinks that the potential energy savings — and the resulting reduction in emissions — could be even larger when taking the plunging prices of other energy-hungry cryptocurrencies into account.
Source: The Verge