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Between their inception in 2009 and early 2022, digital currencies witnessed an extraordinary rise in value, attracting huge investments from wealthy individuals and corporations. At their peak in 2021, the combined value of all cryptocurrencies surpassed US$3 trillion, with the price of a single Bitcoin still the best-known cryptocurrency reaching around US$60,000. The same year, El Salvador became the first country to make Bitcoin legal tender (alongside the US dollar, which replaced its own currency, the coln, in 2001).

Today, amid rising interest rates and numerous industry scandals (in November 2023, Sam Bankman-Fried, founder of the now bankrupt cryptocurrency exchange company FTX, was convicted of multi-billion dollar fraud), the cryptocurrency market has all-but collapsed. However, a considerable amount of money remains in the sector, a concern for experts who say the market has a hidden dark side.

Bitcoin may be a virtual currency, but using it is energy intensive. Simply put, for a Bitcoin transfer to take place, a piece of hardware called an application specific integrated circuit (ASIC) has to solve a mathematical puzzle. This process is known as Bitcoin mining and can take place on a huge scale in cryptocurrency farms where hundreds of ASICs solve riddles at the same time. Crucially, this uses a great deal of computing capacity.

In 2019, a group of researchers at the Technical University of Munich (TUM) released what was then the most comprehensive analysis of the environmental impact of Bitcoin to date. Christian Stoll, who conducts research at both TUM and MIT, explains that to determine the electricity consumption in the network, you need to know the efficiency of the mining devices that are out there. Using the IPO filings of three major hardware companies, we could calculate a pretty accurate number for the efficiency of the hardware that miners actually use. Through this analysis, the researchers determined the annual electricity consumption of Bitcoin, as of November 2018, to be about 46TWh equivalent to that of the entirety of Portugal. They were then able to determine how much CO2 is emitted as a result of this electricity consumption.

They concluded that, in 2018, the use of the currency released around 22 megatons of CO2 emissions comparable to the total emissions of cities such as Hamburg or Las Vegas. A new study from researchers at the United Nations University Institute for Water, Environment and Health (UNU-INWEH) estimates that during the 20202021 period, the use of Bitcoin emitted over 85 megatons of CO2. Moreover, UNU-INWEH scientists say that the cryptocurrency sector has other, majorly overlooked environmental impacts.

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During the same period (2020-2021), the study reveals that Bitcoins water footprint was similar to the amount of water required to fill over 660,000 Olympic-sized swimming pools, or enough to meet the current domestic water needs of more than 300 million people in rural sub-Saharan Africa. Its land footprint was more than 1,870 square kilometres 1.4 times the area of Los Angeles.

These striking figures highlight the heavy reliance of the Bitcoin network on fossil fuels and natural resource-intensive energy sources, prompting researchers to call for urgent regulatory intervention and the development of new technology to mitigate the environmental impacts the greenhouse gas emissions of Bitcoin mining alone could be sufficient to push global warming beyond the Paris Agreements goal of holding anthropogenic climate warming below 2C.

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The hidden costs of Bitcoin go beyond its carbon footprint - Geographical Magazine