What is the environmental impact of crypto?

8 Mar 2022

Ruben MerreNGRAVE Co-founder & CEO

What is the environmental impact of crypto?

Lacking an unambiguous answer to crypto's environmental impact, NGRAVE reframes the question to "What is the environmental impact of PoW crypto mining?"; the most energy-intensive consensus mechanism.

  • Article Quick Links:
  • Reframing crypto’s environmental impact
  • Objectively measuring the environmental impact of PoW
  • Analysing the available data on PoW mining energy consumption
  • Accounting for the inefficiency of energy consumption
  • What is a justified source of carbon?
  • Finding a progressive way forward - adversarial collaboration
  • The Crypto Mining Debate - Another Culture War

Reframing crypto’s environmental impact

The online world doesn’t really appreciate nuance. Clickbait headlines, tweets, posts and micro-videos are all designed to condense ideas into simplified binary narratives (good or bad) for a generation that has a limited attention span. So when people search on Google, looking for an answer to crypto’s environmental impact, they want a straightforward answer.

Unfortunately, as with most important subjects, this particular question has no definitive answer. In fact, we need to start by reframing the question itself.

Crypto is an umbrella term, a catch-all for a diverse group of technologies that share one theme - the use of blockchains. 

Blockchains are permissionless ledgers of information distributed across computer networks. What makes these properties so special is that they can make the data they hold - that includes records of new forms of digital money - censorship-resistant. Centrally held data is easily changed on the whim of a single person, committee or organisation.


Censorship resistance sits on a spectrum that varies depending on howconsensus on the accurate state of data is agreed by each of the points that maintain the blockchain; agreement is achieved by what is known as a consensus mechanism.

Bitcoin, the first ever cryptocurrency, runs on a blockchain using a consensus mechanism called Proof of Work (PoW), which its advocates believe provides the most decentralised blockchain and greatest resistance to censorship. They argue that this is reflected in Bitcoin’s value and adoption.

The work itself is arbitrary, boiling down to a race to find the answer to a mathematical problem, by running a specific algorithm over and over again. 

The real purpose of PoW is regulating the production of new blocks of validated data and issuing new bitcoin as a reward, as the winner of this pseudo lottery gets paid a fixed amount of bitcoin - currently 6.25 BTC (January 2022). The purpose of the incentive is to make it economically futile to try to add inaccurate data.

The race runs every 10 minutes, and is the only way new bitcoin are created; it is normally just described as Bitcoin Mining

Bitcoin Miners continuously run vast warehouses of purpose-built computers - mining rigs - just trying to solve that puzzle, which requires significant amounts of electricity, which is ultimately where Bitcoin’s carbon footprint comes from.

So….with this context in mind, we can now reframe the question to ‘what is the environmental impact of PoW crypto mining?’ as there are many different types of consensus mechanism, but none are anywhere near as energy-intensive as PoW. 

Importantly, Bitcoin isn’t alone in using it, with Ethereum, the second largest cryptocurrency by market capitalisation, also using PoW, though that is planned to change in 2022.

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Objectively measuring the environmental impact of PoW

So now we have a better grasp of what the question is, surely it should be simple enough to pull the data on the energy consumption of PoW crypto miners globally? Unfortunately not.

The quality of decentralisation, introduced above, means that there is no international body to which all crypto miners belong, or even a set of measurement standards, so there is no single reliable source of data on the amount of energy they consume.

Even if that number did exist, that alone wouldn’t throw a lot of light on the issue, as it doesn’t actually directly address the environmental impact. 

What matters is not just the amount of energy crypto mining consumes, but how much of that energy consumption comes from fossil fuel, because that is what contributes to global warming.

Analysing the available data on PoW mining energy consumption

Given the absence of a single source of independently verified data on the amount of energy consumed by crypto mining, we have to pick from what is out there, much of which has a level of bias. The best we can do is take an average of the assessments from opposing interest groups.

The Bitcoin Mining Council was formed in May 2021 with the mandate to “promote transparency, share best practices and educate the public on the benefits of Bitcoin and Bitcoin Mining”.

Given it was started by Michael Saylor, CEO of MicroStrategy, which has the largest bitcoin holding of any publicly traded company (124,391), the BMC can be seen as self-appointed PR for Bitcoin.

In support of its mandate, the BMC conducts surveys of the sustainable power mix of its members (who represent a third of total Bitcoin miners), to counter the arguments around environmental impact. 

The BMC data on Bitcoin mined from renewable energy sources is based on that survey and their own estimates and assumptions.

The BMC doesn’t provide data for Ethereum, which unlike Bitcoin has an organisation - the Ethereum Foundation established in 2014 - to advocate for it, and lend its voice to developments that it feels will contribute to long term success. The most important of which is transitioning Ethereum away from PoW to the main alternative - Proof of Stake (PoS) - which it expects will reduce its Carbon Footprint by 99.95%.

Given that stance, it shouldn’t be a surprise to find that its data is biased in the opposite direction to the BMC, though Ethereum itself doesn’t take an adversarial stance.

The numbers and methodology actually come from a website called the Digiconomist which was set up by Alex De Vries, who is openly critical of the environmental impact of both Ethereum and Bitcoin Mining.

In that sense the Digiconomist provides the perfect counter-argument to the vested interest of the Bitcoin Mining Council, though they face the same challenge regarding data as anyone else interested in the subject.

The Digiconomist obviously doesn’t have access to privileged mining data, and instead employs a methodology for Bitcoin’s overall energy consumption that works backwards from the revenue miners generate (block rewards) to estimate electricity costs and then usage.

  • Total mining revenues are calculated and converted to USD.

  • The proportion of mining revenues spent on electricity costs is estimated.

  • Costs are converted to kilowatt-hours by dividing it by the average price per kilowatt-hour.

Comparing the BMC & Digiconomist Data on PoW Energy Consumption

Taking their different assumptions and methodologies into account, we can try and summarise the data from the two sides - based on data to September 2021, - the most recently available from BMC.

Unfortunately, the Digiconomist Carbon Footprint data assumes 70% of mining takes place in China, with 30% of that clean, butBitcoin Mining was banned in China in 2021, so those Carbon estimates are misplaced. Until they update their website yet we’ll retain their estimate on renewable use, but with that obvious caveat in mind.

As there is no Ethereum Mining Council to provide a counterpoint to Digiconomist, we’ve adjusted the Digiconomist estimates by the variance of their Bitcoin data from our calculated average to provide an adjusted number.

Though these two organisations have opposing agendas their data isn’t that different, differing by about 8%, though still significant in nominal terms.

If, in the absence of alternatives, we are willing to take the average of the two data sets as the best guess, we can conclude that global crypto mining consumes around 257 TwH of electricity annually and around 56% of that contributes to global CO2 emissions. 

What is striking is the recent data from the BMC for total energy consumed by Bitcoin Mining is actually higher than Digiconomist, which must at least add some weight to the accuracy of their data.

To the average person, without an appreciation of the technicalities of energy consumption, or any idea what a TwH even is, the figures on their own aren’t useful, as they provide no context. 

What we end up with is a competition by each side to spin the data to show their findings in the best light and project completely different perspectives to the wider world.

Here’s a summary from the BMC October 2021 report:

  • 29 mining companies representing 33% of the Bitcoin network were surveyed

  • Bitcoin Mining consumes 0.12% of the world’s energy consumption;

  • Sustainable power represents 65.9% of the primary energy usage of BMC miners 

  • Sustainable power represents 57.7% of the primary energy usage of Global BTC miners

  • Bitcoin Mining efficiency improved by 23% against Q2 & sustainable usage by 3%

What the BMC is saying is that two-thirds of the energy usage of their members comes from sustainable power, slightly less for global mining, but both are improving trends. By its figures, Bitcoin Mining accounts for 0.122% of global energy consumption - which doesn’t sound like much. 

Digiconomist compares Bitcoin Mining’s annual energy consumption to that of Thailand, and Etherum’s net energy consumption to Switzerland - wow, now that sounds like a humongous amount.

So given the complexity of the subject matter it really comes down to how the data is interpreted and compared.

As was pointed out in the intro, news headlines are reductionist and seek to sensationalise, so it shouldn’t be a surprise that most mainstream media seize on the country comparison, given that no one has a clue what a terawatt hour of electricity even means.

News outlets, who are very unlikely to conduct their own research, will get a guaranteed reaction from headlines and sound-bites comparing Bitcoin’s energy consumption to Thailand, which also reinforces an entrenched bias against crypto for a whole set of different reasons which are important, but which we don’t have space here to go into.

But just because data is presented in a more consumable way doesn’t mean that is wrong, but it equally doesn’t settle the argument about crypto being bad for the environment.

Accounting for the inefficiency of energy consumption

Even if we were to agree on the middle-ground data on fossil fuel consumption of crypto miners, and are able to understand what that even means, there is yet more context that needs unpacking around how the energy sector works, in order to provide a balanced argument.

If we accept the BMC data, which their footnotes state is taken from British Petroleum and the US Energy Information Administration, there are significant inefficiencies in the way electricity is generated and distributed, as well as other common energy sources.

Viewing the BMC figures, or our combined PoW Mining consumption figures, as a proportion of estimates of wasted energy, it is like a drop in the bucket.

  • Bitcoin Mining equates to 0.38% of the global wasted energy

  • PoW Mining equates to 0.52% of the global wasted energy

That can either be viewed as throwing shade, or suggesting that the solution to reducing global CO2 emissions could be found by improving the efficiency of energy production and distribution, rather than stifling its use.


But what if crypto mining is actually helping improve the efficiency of the energy grid and helping the sustainable energy sector to innovate? Unfortunately, both sides again will argue each side of this coin.

Bitcoin proponent, Nick Carter, makes one of the best arguments for how crypto mining is reshaping the energy sector, pointing to its use of wasted fossil energy - such as flared gas - and how it makes renewable energy more economical by providing demand during off-peak periods, acting like a load-balancing economic battery.


Of course, Alex De Vries disagrees, stating that Bitcoin is “the ideal customer for obsolete fossil fuels rather than renewables since these are both cheap and a source of constant power.”

Given the majority of Bitcoin Mining upped sticks within the space of 8 months, moving out of China in March 2021 and relocated to Kazakhstan, the USA and various other countries, each providing energy with varying degrees of efficiency and sustainability, any data on PoW mining’s carbon footprint must be seen as transitory.

Coal produces more than twice the carbon footprint of natural gas and oil, and Kazakhstan has huge coal reserves, so Bitcoin Mining’s mobility makes it impossible to project long term carbon impact, which will quite conceivably have changed a lot and not be reflected in BMC data if those miners aren’t members. 

This situation could only change if global legislation existed to set a floor on the proportion of sustainable energy Bitcoin Mining must use, which judging by COP26, seems unlikely.

What is a justified source of carbon?

Even if we can factor in crypto mining’s use of wasted energy, as well as any benefits to the renewable sector, the question we are then faced with is whether the resulting carbon footprint matters? This isn’t about denying the environmental impact of CO2 or turning a blind eye to it, rather asking whether it is justified.

Unless we are arguing about a return to pre-industrial living, we must logically accept that some level of energy consumption is acceptable, albeit with the drive towards sustainability. A huge proportion of the world’s population still relies on burning wood and propane for survival. Energy consumption drives economic progress.

What we have to weigh up is whether crypto mining is a justifiable element of that consumption in terms of its progressive benefits.

The problem that PoW advocates, like the BMC, face is that it is impossible to establish an objective cost-benefit analysis of Bitcoin and Ethereum. Instead what we see is selective comparison - or ‘what-about-ism’ - comparing the energy consumption of global Bitcoin Mining to what can easily be considered frivolous activities.

According to the BMC figures Bitcoin mining consumes less energy than Christmas Lights and Gaming (though reading the small print, we should caveat that those figures in part come from a friendly source - Bitcoin Magazine - presenting the same issue around establishing the voracity of the data). 

Given that Bitcoin miners legally purchase the energy to run their businesses, who is to say that mining bitcoin is a bad use of energy and draping your house in Christmas lights to honour a secular tradition, or spending a gazillion hours playing Fortnite, is good? 


1IEA Data is for 2019; 2 Data from BMC 2021 September report; 3Statista

The comparative approach taken by the BMC essentially broadens the argument. If the issue is about non-renewable energy consumption, why pick on crypto mining which appears to be ahead of the curve in terms of renewable usage?

Digiconomist prefers to focus on the perceived benefits, arguing from a purely functional perspective that Bitcoin and Ethereum aren’t justifiable, by highlighting the huge amount of energy their transactions consume when compared to Visa.

According to Digiconomistone Bitcoin transaction produces over 1,000kg of CO2, equivalent to 2.4million Visa transactions.

For environmentally-conscious people living in relatively stable democracies who are perfectly happy using their banking apps, Google Pay and Apple Pay, these numbers will be alarming. They would almost certainly struggle to see the need for Bitcoin or Ethereum for everyday transactions, especially with heightened concerns about global warming.

Setting aside the actual calculations, the logic of the approach has two potential flaws, but the problem for Bitcoin is that you need a level of domain knowledge to understand them. Ironically, because we all use money every day, we take its function for granted. 

Firstly it isn't comparing apples with apples. Visa is a payment network, but Bitcoin is a monetary system, comparable to the US Dollar for example, which when you drill right down is backed by the might of the US military, which itself consumes as much energy as a decent-sized country.

The second issue is that if you are going to pinpoint Bitcoin’s negative externalities, you have to do the same with the monetary system that enables Visa’s fast transactions -  fiat money. 

Here is where you really get into the weeds, as it is an impossible job to do a cost-benefit analysis of the default way money is created and managed.

But simply ignoring the argument is an implicit vote for the financial status quo. This flies in the face of history, which shows that civilisation grows on the back of trade, and the ability to effectively exchange value, with money evolving to best suit that need. 

If we think of money as a way to convert the energy that we put into our endeavours into an exchangeable medium, then Bitcoin is literally money stored as energy.

That energy can then be conveniently moved through space (to spend somewhere else) or time (to spend in the future). Given Bitcoin’s predictable scarcity, and the power of network effects, its future spending power is increasing because more people want what it offers. 

Understanding that idea is crucial to understanding the arguments around Bitcoin’s impact on the environment because it is often framed as Bitcoin sucking up the power of a medium size country, like some malevolent Black Hole, to no meaningful end. 

Accepting this synopsis of Bitcoin’s value proposition isn’t conclusive, but are we saying that a fiat monetary system where global debt has ballooned to $226trillion, representing almost three times world GDP, isn’t in need of improvement? 

Ask someone in Venezuela, where hyperinflation has rendered the Bolivar worthless, whether Bitcoin is justified; ditto in Nigeria, Iran, Turkey or Argentina. 

Agreeing there is a problem, doesn’t necessarily mean that Bitcoin, or another PoW based cryptocurrency, is the answer, though its adoption curve would certainly suggest many people prefer it.

El Salvador has even made it legal tender, partly because a quarter of its GDP comes from Salvadorians working in the US sending money home, and as part of a broader ploy to free them from the shackles of dollarisation. 

Remittance is just of a list of use-cases for Bitcoin which would appear in the ‘benefits’ colum but without a value assigned:

  • Providing a cheaper/more flexible alternative for remittance

  • Freeing people facing financial repression

  • Providing an alternative for people facing hyperinflation

  • Providing an alternative for the unbanked

  • Providing an insurance against government mismanagement of money

  • Providing a store of value

  • Opening up completely new ways of transferring value

As persuasive as these use-cases might seem, they are only potential solutions to complex political and economic problems. They don’t land a killer blow justifying the environmental impact of crypto mining because it is still a value judgement.

So when we correctly frame the question, and take an average of the two data-sets biased to each side of the argument, we can arrive at the cost of crypto mining, in terms of energy consumption, but this doesn’t help answer our question, because it doesn’t establish its worth. 

Yes the number is considerable, but smaller than other activities that are hard to justify, and if you try and argue the inefficiency of PoW crypto versus existing payment channels, you’re ignoring the real-word use cases and relying on inappropriate comparison.


Finding a progressive way forward - adversarial collaboration

As things stand these two opinions might seem impossible to reconcile, but this may just reflect both the unique nature and immaturity of crypto. What it needs is what science terms adversarial collaboration; where opposing sides of an argument agree on a framework to test competing hypotheses.

There are elements of that approach in the open letter that Bitcoin Magazine penned to Elon Musk, asking him to reconsider his stance on Bitcoin’s environmental impact.


Musk made a dramatic U-turn at the start of 2021 having declared that Tesla would accept bitcoin as payment for its vehicles, he quickly reverse his decision, citing environmental concerns. The thrust of Bitcoin Magazine’s letter is drawing attention to Musk’s pledge to row back on his black-balling bitcoin:

“[if] the percentage of renewable energy usage is most likely at or above 50%, and that there is a trend toward increasing that number”

But more interesting is their suggestion of a methodology to assess the environmental impact of Bitcoin, which may help move the opposing sides closer together, or at least to make the debate more constructive.

The Crypto Mining Debate - Another Culture War

Until we can arrive at an agreed framework to assess the environmental impact of crypto as well as its positive worth, the discussion will remain polarised.

The fact that Bitcoin and Ethereum have combined market capitalisations of over $1.2 trillion would suggest that the value argument has been settled, but paradoxically, the more PoW cryptocurrencies increase in value, the more their worth will be challenged, with environmental impact the most common attack vector.

With Ethereum transitioning to Proof of Stake, even more pressure will be heaped on Bitcoin to justify its increasingly isolated position in terms of its consensus method.

Crypto gains are realised by individuals and private companies, but the cost of carbon output is borne by everyone else. This is what is known in economics as a negative externality. Where the market cannot account for a cost, governments will, through regulation.

The US Congress is holding a hearing into crypto mining in early 2022 which could have significant ramifications.

The problem that crypto faces is that its decentralised nature doesn’t provide a base from which to argue its case - one reason why the BMC has emerged. On top of which, the government has a vested interest in protecting its monopoly over money creation, so may well use the environmental concerns, and the negative externality argument, to defend that power.

Ethereum is turning its back on mining, but there are no such proposals for Bitcoin, which must face the growing risk of regulation alone. 

It could settle the argument by using 100% renewable energy, and though that might be realistic down the line, by its own figures, that utopia is a long way off. 

Right now crypto mining has a significant carbon footprint, so in the context of global warming, must - just like any other industry - find ways to be more efficient and sustainable in its energy use. 

The difficulty it has in justifying itself to a sceptical public, who may struggle to understand its wider value, should add even greater impetus for this change. At the same time, in face of the ongoing challenge to its validity, it needs to better organise and justify itself, but without somehow compromising its core value of decentralisation - which won’t be easy. 

With Bitcoin’s adoption steadily increasing, yet so little common ground in terms of its energy consumption, and so much difference of opinion to justify its existence, the subject of crypto’s environmental impact looks set to become another example of a culture war.

NGRAVE Co-founder & CEO
Ruben Merre

Ruben is a repeat tech entrepreneur. His focus is on digital asset security and financial empowerment. He is co-founder and CEO of NGRAVE, the creator of “ZERO” - the world’s most secure hardware wallet for crypto storage. In 2021, he was selected for Belgium’s 40 under 40. Before that, he was a finalist in scale-ups.eu’s Disruptive Innovator of the Year 2020 Award, and nominated in Google/PWC/Trends’ Digital Pioneer 2020.