This level sits between the levels produced by the nations of Jordan and Sri Lanka

Blockchain solutions are increasingly discussed for a broad variety of use cases beyond cryptocurrencies. Although not all blockchain protocols are as energy intensive as Bitcoin’s protocol, environmental aspects, the risk of collusion, and concerns about control must not be ignored in the debate on anticipated benefits. Our findings for the first stage of blockchain diffusion and the externalities we discuss may help policy-makers in setting the right rules as the adoption journey of blockchain technology has just started.

Blockchain technology has its roots in the cryptocurrency Bitcoin, which was the first successful attempt to validate transactions via a decentralized data protocol. This validation process requires vast amounts of electricity, which translates into a significant level of carbon emissions. Our approximation of Bitcoin’s carbon footprint underlines the need to tackle the environmental externalities that result from cryptocurrencies.

Participation in the Bitcoin blockchain validation process requires specialized hardware and vast amounts of electricity, which translates into a significant carbon footprint. Here, we demonstrate a methodology for estimating the power consumption associated with Bitcoin’s blockchain based on IPO filings of major hardware manufacturers, insights on mining facility operations, and mining pool compositions. We then translate our power consumption estimate into carbon emissions, using the localization of IP addresses. We determine the annual electricity consumption of Bitcoin, as of November 2018, to be 45.8 TWh and estimate that annual carbon emissions range from 22.0 to 22.9 MtCO 2 . This means that the emissions produced by Bitcoin sit between the levels produced by the nations of Jordan and Sri Lanka, which is comparable to the level of Kansas City. With this article, we aim to gauge the external costs of Bitcoin and inform the broader debate on the costs and benefits of cryptocurrencies.

Introduction

1 CoinMarketCap Cryptocurrency market capitalization. , 2 Nakamoto S. Bitcoin: a peer-to-peer electronic cash system. 3 Yaga D.

Mell P.

Roby N.

Scarfone K. NISTIR 8202: blockchain technology overview. In 2008, Satoshi, the pseudonymous founder of Bitcoin, published a vision of a digital currency which, only a decade later, reached a peak market capitalization of over $800 billion.The revolutionary element of Bitcoin was not the idea of a digital currency in itself but the underlying blockchain technology. Instead of a trusted third party, incentivized network participants validate transactions and ensure the integrity of the network via the decentralized administration of a data protocol. The distributed ledger protocol created by Satoshi has since been referred to as the “first blockchain.”

4 Narayanan A.

Bonneau J.

Felten E.

Miller A.

Goldfeder S. Bitcoin and Cryptocurrency Technologies: A Comprehensive Introduction. Bitcoin’s blockchain uses a Proof of Work consensus mechanism to avoid double spending and manipulation. The validation of ownership and transactions is based on search puzzles of hash functions. These search puzzles have to be solved by network participants in order to add valid blocks to the chain. The difficulty of these puzzles adjusts regularly in order to account for changes in connected computing power and to maintain approximately 10 min between the addition of each block.

5 Blockchain.com Blockchain charts. , 6 de Vries A. Bitcoin's growing energy problem. 7 The Economist Why are Venezuelans mining so much bitcoin?. 8 UNFCCC Paris agreement. During 2018, the computing power required to solve a Bitcoin puzzle increased more than 4-fold until October and heightened electricity consumption accordingly.Speculations about the Bitcoin network’s source of fuel have suggested, among other things, Chinese coal, Icelandic geothermal power, and Venezuelan subsidies.In order to keep global warming below 2°C—as internationally agreed in Paris COP21—net-zero carbon emissions during the second half of the century are crucial.To take the right measures, policy-makers need to understand the carbon footprint of cryptocurrencies.

We present a techno-economic model for determining the electricity consumption of the Bitcoin network in order to provide an accurate estimate of its carbon footprint. Firstly, we narrow down the power consumption, based on mining hardware, facilities, and pools. Secondly, we develop three scenarios representing the geographic footprint of Bitcoin mining, based on pool server IP, device IP, and node IP addresses. Thirdly, we calculate the carbon footprint, based on the regional carbon intensity of power generation.

In comparison to previous work, our analysis is based on empirical insights. We use hardware data derived from recent IPO filings, which are key to a reliable estimate of power consumption since the efficiency of the hardware in use is an essential parameter in this calculation. Furthermore, we include assumptions about auxiliary factors, which determine the power usage effectiveness (PUE). Losses from cooling and IT equipment have a significant effect but have been largely neglected in prior studies. Besides estimating the total power consumption, we determine the geographical footprint of mining activity based on IP addresses. This geographical footprint allows for a more accurate estimation of carbon emissions than earlier work.

9 Mora C.

Rollins R.L.

Taladay K.

Kantar M.B.

Chock M.K.

Shimada M.

Franklin E.C. Bitcoin emissions alone could push global warming above 2°C. 10 Krause M.J.

Tolaymat T. Quantification of energy and carbon costs for mining cryptocurrencies. 6 de Vries A. Bitcoin's growing energy problem. , 11 Digiconomist Bitcoin energy consumption index. Figure 1 Power Consumption and Carbon Emission Estimates in Previous Studies Show full caption The data reflect the power consumption at a specific date. Thus, the data are presented in power (W) rather than energy (J). 34 Vranken H. Sustainability of bitcoin and blockchains. (A) 100–500 MW power consumption as of January 1, 2017. 35 Bevand M. Electricity consumption of Bitcoin: a market-based and technical analysis. (B) 470–540 MW as of February 2017, 816–944 MW as of July 2017, and 1,620–3,136 MW with a best guess of 2,100 MW as of November 1, 2018. 6 de Vries A. Bitcoin's growing energy problem. (C) 2,550–7,670 MW as of March 2018, calculated by assuming miners spent 40% of all revenues on hardware and 60% on electricity. 10 Krause M.J.

Tolaymat T. Quantification of energy and carbon costs for mining cryptocurrencies. (D) 948 MW as 2017 average and 3,441 MW as first 6 months 2018 average. 36 McCook, H. (2018). The cost & sustainability of bitcoin, https://www.academia.edu/37178295/The_Cost_and_Sustainability_of_Bitcoin_August_2018_. (E) 12,080 MW as of July 2018; only value that includes the power spent on manufacturing of the mining hardware, which represents 57% of this total power (and emissions) estimate; PUE of 1.25 considered. 11 Digiconomist Bitcoin energy consumption index. (F) 7,687 MW average of daily estimates in November 2018; daily estimates range from 5,983 MW to 8,347 MW in November 2018; estimates calculated by assuming 60% of revenues are spent on operational costs including electricity, hardware, and cooling costs. (G) 345 MW as of December 2016, 1,637 MW as of December 2017, and 5,232 MW as of November 2018; PUE of 1.05 considered. 2 emissions as of 2017; calculation based on the flawed assumption that the number of transactions drives power consumption. 9 Mora C.

Rollins R.L.

Taladay K.

Kantar M.B.

Chock M.K.

Shimada M.

Franklin E.C. Bitcoin emissions alone could push global warming above 2°C. (H) 69 MtCOemissions as of 2017; calculation based on the flawed assumption that the number of transactions drives power consumption. 2 emissions as of February 2018, including Ethereum. 28 Foteinis S. Bitcoin's alarming carbon footprint. (I) 43.9 MtCOemissions as of February 2018, including Ethereum. 2 emissions range calculated using the median daily power consumption from January 2016 to June 2018 multiplied by CO 2 emission factors of seven countries, assuming all miners would be based in one of these countries. 10 Krause M.J.

Tolaymat T. Quantification of energy and carbon costs for mining cryptocurrencies. (J) 2.9–13.5 MtCOemissions range calculated using the median daily power consumption from January 2016 to June 2018 multiplied by COemission factors of seven countries, assuming all miners would be based in one of these countries. 2 emissions as of July 2018, using a global average CO 2 emission factor. 36 McCook, H. (2018). The cost & sustainability of bitcoin, https://www.academia.edu/37178295/The_Cost_and_Sustainability_of_Bitcoin_August_2018_. (K) 61 MtCOemissions as of July 2018, using a global average COemission factor. 2 emissions as of November 2018, using an emission factor of 0.7 kg CO 2 per kWh for 70% of the power consumption (based on China’s average emission factor), and assuming clean energy for the remaining 30%. 11 Digiconomist Bitcoin energy consumption index. (L) 25.8 MtCOemissions as of November 2018, using an emission factor of 0.7 kg COper kWh for 70% of the power consumption (based on China’s average emission factor), and assuming clean energy for the remaining 30%. (M) 22.0–22.9 MtCO 2 emissions as of November 2018; range reflects three footprint scenarios with a respective local carbon intensity of power generation. 5 Blockchain.com Blockchain charts. (N) Indexed hash rate (required computing power) since January 1, 2017; data retrieved from Blockchain.com ( https://www.blockchain.com/charts ). See Figure 2 for absolute values. Previous academic studies, such as predictions of future carbon emissionsor comparisons of cryptocurrency and metal mining,are based on simplistic estimates of power consumption and lack empirical foundations. Consequently, the estimates produced vary significantly among studies, as depicted in Figure 1 . For instance, De Vries published in Joule an estimate of 2.55 to 7.67 gigawatts as of March 2018, while his Digiconomist site suggested a number at the very upper end of this range at that time.