China’s electricity-hungry bitcoin mines that power nearly 80% of the global trade in cryptocurrencies risk undercutting the country’s climate goals, a study in the journal Nature has said.
Bitcoin and other cryptocurrencies rely on “blockchain” technology, which is a shared database of transactions, with entries that must be confirmed and encrypted. The network is secured by individuals called “miners” who use high-powered computers to verify transactions, with bitcoins offered as a reward. Those computers consume enormous amounts of electricity.
About 40% of China’s bitcoin mines are powered with coal, while the rest use renewables, the study said. However, the coal plants are so large they could end up undermining Beijing’s pledge to peak carbon emissions before 2030 and become carbon neutral by 2060, it warned.
The Nature study on Tuesday found that unchecked, China’s bitcoin mines will generate 130.5m metric tons of carbon emissions by 2024 – close to the annual greenhouse gas emissions of Italy or oil-rich Saudi Arabia.
Chinese companies with access to cheap electricity and hardware handled 78.89% of global bitcoin blockchain operations as of April 2020, the study said. This involves minting new coins and keeping track of cryptocurrency transactions.
Co-author Wang Shouyang from the Chinese Academy of Sciences said: “The intensive bitcoin blockchain operation in China can quickly grow as a threat that could potentially undermine the emission reduction effort.”
The government should focus on upgrading the power grid to ensure a stable supply from renewable sources, Wang said. “Since energy prices in clean-energy regions of China are lower than that in coal-powered regions … miners would then have more incentives to move to regions with clean energy.”
This year the crypto-mining industry is expected to use 0.6% of the world’s total electricity production, or more than the annual use of Norway, according to Cambridge University’s Bitcoin Electricity Consumption Index.
The price of a bitcoin has surged fivefold in the past year, reaching a record high of over $61,000 in March, and is now hovering just below the $60,000 mark.
Given the profits available, Wang said imposing carbon taxes was not enough to deter miners.
China banned trading in cryptocurrencies in 2019 to prevent money laundering, but mining is permitted.
Coal-rich regions are now pushing out bitcoin miners as they struggle to curb emissions. Last month, Inner Mongolia announced plans to end the power-hungry practice of cryptocurrency mining by the end of April after the region failed to meet annual energy consumption targets.
The region accounted for 8% of the computing power needed to run the global blockchain – the set of online ledgers that record bitcoin transactions. That is more than the amount of computing power dedicated to blockchain in the US.
Nasdaq-listed Bitmain, which operates one of the biggest cryptocurrency mining pools in the world, said it was shifting operations in Inner Mongolia to areas with more hydropower such as Yunnan.