On Friday August 11, 2017, technicians will be performing repairs on Bitcoin mining machines at a mining facility operated by Bitmain in Ordos, Inner Mongolia, China.
Qilai Shen | Bloomberg | Getty Images
According to a study published this week, China could exceed its emissions reduction targets due to its carbon-intensive Bitcoin mining.
According to the study, around 75% of global Bitcoin mining is carried out in China, where cheaper electricity and relatively easy access to manufacturers who produce special hardware are available. As a result, the country’s carbon footprint is as large as one of the ten largest cities, according to the newspaper.
Unlike most forms of currency that are issued by a single entity such as a central bank, Bitcoin is based on a decentralized network and needs to be “mined”.
This is what happens when Bitcoin transactions recorded in a public ledger called a blockchain are “verified” by miners. These miners operate specially designed computers to solve complex mathematical puzzles that effectively make a Bitcoin transaction possible. The miners then receive Bitcoin as a reward.
This degradation on computers consumes large amounts of electricity, especially when done on a large scale.
The research on China’s mining activities – published by the journal Nature Communications on Tuesday – Was conducted by scientists from the University of the Chinese Academy of Sciences, Tsinghua University, Cornell University and the University of Surrey.
It is coming despite the rhetoric from China that it is interested in getting greener. President Xi Jinping said last year the country is aiming for the highest carbon emissions by 2030 and carbon neutrality by 2060. Bitcoin, however, threatens to derail those plans.
“Without proper interventions and workable measures, the intense bitcoin blockchain operations in China can quickly become a threat that could potentially undermine the emissions reduction efforts being made in the country,” the authors write.
Globally, Bitcoin mining consumes an estimated 128.84 terawatt hours (TWh) of energy per year – more than entire countries like Ukraine and Argentina, according to the Cambridge Bitcoin Electricity Consumption Index, a project by the University of Cambridge.
“The growing energy consumption and associated carbon emissions from Bitcoin mining could potentially undermine global sustainable efforts,” the authors of the latest study write.
“Without political intervention, the annual energy consumption of the Bitcoin blockchain in China is expected to peak at 296.59 Twh in 2024, generating 130.50 million tons of carbon emissions.”
The authors state that China’s bitcoin energy consumption will exceed total energy consumption in Italy or Saudi Arabia by 2024.
While the study was published in a peer-reviewed journal, some have said it lacks the necessary data.
Nic Carter, partner in the venture capital firm Castle Island Ventures and co-founder of the crypto website Coin Metrics, wrote on Twitter that the paper “leaves much to be desired”.
“I expected most of the paper to be on provincial level data covering the energy mix of Chinese miners,” wrote Carter. “But that’s missing. Instead, they claim to have accounted for … but don’t show their work. They just claim that they have quantified this.”
The authors did not immediately respond to CNBC’s request for comment.
China’s Inner Mongolia Region said last month it plans to ban new cryptocurrency mining projects and cease existing activities to reduce energy consumption.
Inner Mongolia, located in northern China, did not meet the central government’s assessment targets for energy consumption in 2019 and was abused by Beijing. In response, the Region’s Development and Reform Commission put forward plans to reduce energy consumption. Part of these plans is to close existing cryptocurrency mining projects until April 2021 and not approve any new ones.
The motives for China’s intense bitcoin mining could go beyond making money (the value of bitcoin rose from $ 7,000 to nearly $ 60,000 in the last year). Silicon Valley billionaire Peter Thiel raised concerns this week This bitcoin could be used as a “Chinese financial weapon against the US”.
“Although I’m a kind of pro-crypto-pro-Bitcoin maximalist, I wonder if Bitcoin should also be partially thought of as a Chinese financial weapon against the US, where it threatens fiat money, but it threatens the US in particular Dollars, and China wants to do things to weaken it, China’s long Bitcoin, “said Thiel on Tuesday at a virtual event by the Richard Nixon Foundation.
The co-founder of PayPal and Palantir has invested in Bitcoin companies and previously said he was “Long Bitcoin” and viewed it as the “digital equivalent of gold”.
– Additional coverage from CNBC’s Arjun Kharpal.