Bitcoin transactions consume an average of six million times more water than a typical credit card swipe, according to a study published in Cell Reports Sustainability. The water footprint is primarily due to the power and cooling requirements of the millions of computers supporting the cryptocurrency. In 2021, Bitcoin consumed nearly 1,600 billion liters of water, with projections for 2023 suggesting an even more alarming figure of over 2,200 gigaliters. The energy-intensive process of Bitcoin mining, known as “proof of work,” generates 500 quintillion guesses every second of the day, contributing to Bitcoin’s substantial electricity consumption. This could exacerbate water scarcity issues, as regions grappling with freshwater shortages face increasing challenges. A potential solution is reevaluating Bitcoin’s proof-of-work method, as Ethereum transitioned to a system called “proof of stake” in September 2022, reducing power usage by over 99%. However, implementing such changes may be challenging due to Bitcoin’s decentralized management structure.
The Water Footprint of Bitcoin
The staggering water consumption associated with Bitcoin transactions is primarily attributed to the extensive power and cooling requirements of the millions of computers globally that support the cryptocurrency. In 2021 alone, Bitcoin is estimated to have consumed nearly 1,600 billion liters (gigaliters) of water. The projection for 2023 suggests an even more alarming figure of over 2,200 gigaliters.
Power Hungry Process
The underlying reason for Bitcoin’s substantial water usage lies in its energy-intensive process known as “Bitcoin mining.” This process involves miners auditing transactions to earn digital currency. However, the competition among miners to complete audits results in the same transaction being worked on simultaneously by numerous powerful and power-hungry computers.
Alex de Vries explains, “You have millions of devices around the world, constantly competing with each other in a massive game of what I like to describe as ‘guess the number.’ All of these machines combined are generating 500 quintillion guesses every second of the day, non-stop – that is 500 with 18 zeros behind it.” This method, called “proof of work,” significantly contributes to Bitcoin’s substantial electricity consumption.
Impact on Freshwater Resources
As regions worldwide grapple with freshwater shortages, the study underscores the potential exacerbation of water scarcity issues due to Bitcoin’s excessive water consumption. Approximately three billion people are already experiencing water shortages globally, and this situation is expected to worsen in the coming decades.
The regions most affected by water shortages include Central Asia and parts of the United States, particularly around California. Alex de Vries emphasizes that as climate change intensifies, the water scarcity situation is likely to deteriorate further.
Potential Solutions: A Shift in Bitcoin’s Proof of Work
While Bitcoin’s proof-of-work method is undeniably energy-intensive, a potential solution lies in reevaluating and altering this process. The major cryptocurrency Ethereum took a step in this direction in September 2022 by transitioning to a system called “proof of stake.” This change led to a remarkable reduction of over 99% in Ethereum’s power usage.
However, experts warn that implementing such changes in Bitcoin may not be straightforward. Professor James Davenport of the University of Bath points out that Ethereum’s transition was facilitated by a more centralized management structure compared to Bitcoin. The decentralized nature of Bitcoin’s management could pose challenges in implementing significant changes to reduce energy consumption.
Concerns Raised by Experts
Dr. Larisa Yarovaya, Associate Professor of Finance at the University of Southampton, expresses concern about the freshwater usage for Bitcoin mining, especially in regions already grappling with water scarcity. She suggests that this should be a cause for concern among regulators and the public.
As Bitcoin continues to gain prominence in the financial landscape, its environmental impact is becoming a topic of increasing concern. The study’s findings highlight the urgent need for the cryptocurrency community to explore and implement more sustainable practices, potentially reevaluating the energy-intensive proof-of-work method. As the world faces growing challenges related to climate change and freshwater scarcity, addressing the environmental footprint of cryptocurrencies is crucial for a sustainable and responsible digital future.