A report commissioned by the White House has warned that cryptocurrency mining is using up to 0.9 percent of all the world's electricity, and criticizes proof-of-work schemes as used on Bitcoin and Ethereum.
The report, from the Office of Science and Technology Policy (OSTP), has called for more research into the energy impact of mining for cryptocurrencies such as bitcoin, as well as further investigation of whether the underlying distributed ledger technology, blockchain, could be harnessed for positive environmental work.
The report, Climate, and Energy Implications of Crypto-Assets in the United States [PDF] comes in response to President Biden's Executive Order 14067: “Ensuring Responsible Development of Digital Assets,” which asked how digital development related to the US' climate change goals.
Worldwide, crypto mining consumes between 120 and 240 billion kWh of energy per year, which is between 0.4 and 0.9 percent of the world's electricity usage, and more than some entire countries, such as Argentina or Australia. This figure is also comparable with the entire consumption of conventional, non-crypto data, which is around 200 to 250 billion kWh per year, according to the OSTP report.
The US probably has the most crypto-mining, hosting around one-third of the world's crypto operations, and spends between 0.9 and 1.7 percent of its electricity on the activity - an amount roughly equivalent to all the home computers in the country, or all the residential lighting.
This creates some 25 to 50 Megatons of CO2 per year, which is 0.4 to 0.8 percent of the country's total GHG emissions, roughly similar to the emissions from diesel fuel used in railroads.
The report also notes that cryptocurrency mining produces large amounts of electronic waste, as application-specific chips (ASICs) are quickly superseded, and can't be repurposed for other uses.
Worldwide, the report says that Bitcoin and Ethereum consumed one hundred times as much as the entire carbon footprint of Visa, Mastercard, and American Express combined - while processing a tiny fraction of the number of transactions handled by credit card companies.
The sector is also highly volatile, due to rapid fluctuations in the value of crypto assets. The report notes: US energy use on the activity has tripled since January 2021, and the country's share of the Bitcoin sector went from 3.5 percent in 2020 to 38 percent today.
Worldwide, the report reckons that annualized crypto-asset electricity consumption grew by 67 percent between July 2021, and January 2022, then fell by 17 percent in the period to August 2022. During this period, China banned crypto mining, which shifted its distribution around the world.
This potential for rapid growth means crypto could have major impacts on consumers and the reliable electricity grid, the report says. Texas has emerged as a hub for crypto-mining, where the activity now uses three percent of peak electricity demand and is expected to consume 25GW of new capacity in the next decade (roughly one-third of its current peak demand), potentially straining its already rickety grid.
The report notes that crypto mining can have a negative impact on equity, communities, and the environment, and recommends that cryptocurrency activities should be limited, where they increase greenhouse gas emissions, add to the cost of electricity for other consumers, or make grids more unreliable.
It also suggests that crypto mining could use excess or "curtailed" renewable electricity, generated when demand is not high - and suggests that crypto mining might be restricted to facilities that generate at least as much energy as they need, providing the surplus to the grid.
The report addresses crypto mining at oil wells, where the rig is powered by burning flared methane gas, converting a potent GHG into a less potent one (CO2). However, it comments: "Mining operations that replace existing methane flares would not likely affect CO2 emissions, since this methane would otherwise be flared and converted to CO2."
The report suggests that mining operations might reduce "wasted" methane, but the gas "could also be recovered using existing vapor capture technologies at oil and gas wells."
One big issue flagged in the report is that the vast majority of crypto energy use is in Bitcoin and Ethereum which use "proof of work" (PoW) validation. Switching to "proof of stake" (PoS), as in the proposed Ethereum 2.0, would reduce the energy demand to less than one percent of today's levels. The drawback here is that PoS schemes require "validators" to make a massive initial investment, skewing the activity towards the wealthy.