Cambridge Centre Adjusts Bitcoin Energy Use Estimates Downwards

The Cambridge Centre for Alternative Finance has updated its Bitcoin Electricity Consumption Index. This revision presents a reduced approximation of the digital currency’s energy consumption. The Centre recognized that the initial model, operational since 2019, amplified the energy estimates, especially during periods of heightened mining profits.

A deep dive into the previous methodology revealed that it equally factored in all operational mining machines. This approach often overstated energy use during peak profitability times, primarily due to the over-inclusion of older, less energy-efficient machines. The recent report highlighted, “Evidence suggests this bottleneck resulted in even next-generation hardware being stored in warehouses due to a lack of space in data centers.” This implies that to boost efficiency, miners prioritized newer over older machines.

To provide more accurate readings, Cambridge introduced a weighting element in their revised model. This factor considers the elevated influence of the latest, potent mining rigs on Bitcoin’s comprehensive computational power and energy use. Additionally, a two-month delay has been incorporated to reflect the gap between the launch and utilization of new equipment.

These alterations led to notable reductions in estimated energy use. For 2021, the consumption dropped by 15 TWh, settling at 89 TWh from the initial 104 TWh. The 2022 predictions also saw a decrease, moving from 105.3 TWh to 95.5 TWh. The report affirmed, “We are confident about our estimates and regard each update as a progressive step toward enhancing their reliability.” The Centre is committed to showcasing the effects of these revisions on previous figures in the spirit of transparency.

While the Cambridge index offers a generalized idea about Bitcoin’s energy consumption, it does emphasize the challenges in pinpointing exact numbers due to the cryptocurrency’s decentralized framework. The Centre anticipates refining their methodology further, incorporating the environmental impacts and potential solutions tied to mining.

The Cambridge Centre believes that while their updates enhance the reliability of Bitcoin’s estimated electricity consumption, obtaining an exact figure remains challenging due to inherent limitations. The actual power source used for Bitcoin mining, as well as the geographical distribution of mining activities, are both critical components of understanding Bitcoin’s environmental impact. Electricity generation can vary within countries, and there’s evidence suggesting mining activities occur both in front and behind the meter.

Additionally, there are emerging concepts that could reduce emission estimates, such as mining operations collocating near oil fields to utilize otherwise flared natural gas, using orphaned gas wells, and reducing methane emissions from landfills. Other possible advantages, like mining promoting renewable energy infrastructure investment, exist but are harder to quantify.

However, there are also negative environmental impacts. The current assessment doesn’t factor in e-waste, which is estimated to be between 30 kt to 60 kt. There are also concerns about noise disturbances, water use, and thermal pollution.

In conclusion, there’s still a lot to explore regarding the impact of cryptocurrency mining on the environment and society. The Centre’s ongoing research aims to provide a more detailed view of Bitcoin’s electricity mix, the climate risks, and potential benefits of cryptocurrency mining. They are also working on a carbon accounting tool for Bitcoin and plans to expand their research beyond just Bitcoin and Ethereum.