Bitcoin Mining is more Polluting than Gold Mining

Bitcoin’s usefulness as a payment system has been deteriorating fast over the past year. Bitcoin transaction fees and price volatility skyrocketed, prompting big companies such as Steam and Microsoft to stop accepting Bitcoin payments. This development has resulted in the community now being increasingly focused on defining Bitcoin as an alternative to physical gold; making it a long-term way to store wealth.

Whether this makes sense is an interesting discussion by itself. Any owner of a gold bar can be fairly certain that he or she won’t suddenly receive a similar gold bar created out of  thin air, but things have proven to be more complicated in Bitcoin. Anyone that held one Bitcoin at the start of 2017, and held onto it for the entire year, would have ended the year with at least one Bitcoin Core, one Bitcoin Cash and one Bitcoin Gold. But let’s assume for now that this won’t stand in the way of Bitcoin becoming “digital gold”. Unfortunately, not even becoming digital gold will be enough to make Bitcoin’s sustainability problems go away.

By now, we know that Bitcoin has a serious problem when compared to traditional payments systems in terms of energy consumption and environmental impact. One Bitcoin transaction requires the same amount of electricity as an average household uses in a month or more (in most developed countries). That’s several thousands of times more than what’s required by traditional payment systems. Comparisons of Bitcoin to gold are, however, still scarce, and certainly not available in any live data feeds.

Bitcoin versus Gold

To get started with the previous we can first compare the total amount of energy consumed by gold mining versus the total amount consumed by Bitcoin mining. While looking at these numbers, it’s important to keep in mind that in Bitcoin, mining is essential for the creation of new blocks, and thus for keeping the system running. The high costs involved in this process are an important part of what keeps the system secure. Mining for gold doesn’t serve a similar purpose.

Energy Consumption

The data for Bitcoin’s energy consumption is available from the Bitcoin Energy Consumption Index, although an adjustment is made to exclude Bitcoin Cash (making it easier to measure the total energy consumed per mined coin later on). For completeness, we also include a minimum limit for Bitcoin’s energy consumption based on the current network computational power. For gold, we assume an energy consumption of 175 Gigajoules per kilogram of gold mined. Around 3100 metric tons of gold are mined every year, putting the total energy requirement of gold mining close to 150 terawatt-hours per year.

Based on this chart it can be established that gold mining requires a lot more energy than Bitcoin mining, but this only tells half the story. After all, the total value of all the gold mined (well over $100 billion) also significantly exceeds the total value of all the Bitcoin being mined.

A more appropriate way to compare the two would therefore be to consider the energy requirement per equal amount of value produced. The next chart shows how it looks like when the average electricity consumed to generate one Bitcoin is plotted against the average energy consumed to mine one Bitcoin worth of gold.

Interestingly, the chart reveals that even in the most optimistic case, Bitcoin mining is actually more energy-intensive than gold mining. Given a more realistic number, the difference increases fast.

Carbon Footprint

On top of this, we can find that the process of mining Bitcoin isn’t just more energy-intensive, but also has a bigger environmental impact. To reach that conclusion, we first need to estimate the carbon footprint for both. For Bitcoin we can, again, get this number from the Bitcoin Energy Consumption Index. For gold, we assume a carbon footprint of 20 tons of CO2e per every kilogram of gold mined.

Again, the result doesn’t look good for Bitcoin even in the most optimistic case. The carbon footprint is huge for both, considering that the average global carbon footprint per household is approximately 10 tons of CO2e per year, but Bitcoin is the clear “winner”. This means that when you’re deciding whether to hold physical gold or Bitcoin, gold might just be the greener option, and it has the added benefit that it will continue to function even if mining stops completely.

One Response

  1. Yulia January 24, 2018

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