A new study published Tuesday by the Cambridge Center for Alternative Finance (CCAF) shows that nearly 62% of Bitcoin’s total energy consumption since January 2022 was generated from fossil fuels. This means that renewable sources only account for 38% of the total energy consumed by BTC miners this year.
As a Proof-of-Work (PoW) blockchain, processing and validating BTC transactions (mining) requires a lot of computational power and solving mathematical puzzles with powerful computers that consume large amounts of energy.
Coal becomes the highest single energy source for BTC mining
The research, delivered in the CCAF’s Bitcoin Mining Data Index, Cambridge Bitcoin Electricity Consumption Index (CBCI), highlights the drastic changes in Bitcoin’s electricity consumption over the past few years. Data shows that coal and natural gas are the fastest growing energy resources for bitcoin mining.
Coal alone saw significant growth of nearly 37% of Bitcoin’s total energy consumption in early 2022, making it the single highest energy source for mining activities. This is similar to 40% of the coal energy consumed in 2020.
Hydraulic power drops to 15%
In terms of sustainable energy sources, hydropower led the way with a 15% share of the total energy sources used in BTC mining. However, hydropower consumption experienced a massive decline, falling from 34% in 2020 to 15% in 2021.
However, the role of natural gas and nuclear power in Bitcoin mining has continued to grow in the past two years.
Natural gas shares saw a significant increase from 13% in 2020 to 23% in 2021, while nuclear power consumption rose from 4% in 2021 to almost 9% in 2022.
The study attributes the poor performance of Bitcoin’s energy mix and price fluctuations between 2020 and 2021 to the relocation of China’s major mining companies due to the crackdown in the country.
CCAF research reveals that China contributed approximately 65% of the world’s total hashrate, with most energy sources coming from hydropower (33.7%) or coal, which accounted for (40.4%) of total resources.
“The Chinese government’s ban on cryptocurrency mining and the resulting shift in Bitcoin mining activity to other countries negatively affected Bitcoin’s environmental footprint,” the study notes.
Climate groups and regulators want Bitcoin to adopt PoS
Due to the high energy consumption of the world’s largest cryptocurrency, climate groups and environmental regulators have called for Bitcoin to migrate to proof-of-stake (PoS) to make the network more energy efficient.
Earlier this month, the environmental advocacy group Greenpeace USA said Bitcoin should change its consensus mechanism to PoS like Ethereum because PoW is fueling the climate crisis.
Likewise, in July, the European Central Bank (ECB) compared PoW to fossil fuel cars and PoS to electric vehicles, noting that Bitcoin’s benefit to society is “doubtful”.
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