Brussels, Stockholm Economical cars, insulated houses, modern industrial plants: In order to become climate-neutral, Europe is trying to save as much energy as possible. The crypto industry is not yet in focus. It consumes vast amounts of electricity, continues to grow and is now also gaining a foothold in Europe.
The most important crypto currencies Bitcoin and Ether are based on a technology that consumes a lot of electricity. New coins are created by special computers solving increasingly complicated tasks. That’s why the server farms keep growing, are always equipped with the latest technology and put a strain on the power grids.
While the EU has banned power-guzzling refrigerators and industrial companies have to justify their energy consumption, the cryptocurrency business has so far been unhindered.
China, on the other hand, banned the energy-intensive “proof of work” mining method last year. The government argued that mining is an extremely harmful industry that jeopardizes the plan to go carbon neutral. Until then, almost every second bitcoin was created in China.
Many miners then apparently brought their servers across the border to Kazakhstan, where the computing power of the Bitcoin network doubled. In Kazakhstan, coal-fired power is particularly cheap. The government supported the new industry with hundreds of millions of dollars.
But then reports of power outages began to pile up. The country even had to buy electricity from Russia. Now the government is considering building nuclear power plants.
130 terawatt hours of electricity consumption per year worldwide
An index from the University of Cambridge records how much electricity the bitcoin consumes. According to this, it was a good 130 terawatt hours per year worldwide. The researchers also provide the appropriate comparison values: Bitcoin has already overtaken the Netherlands, and there is still something missing before Poland consumes it.
It is not possible to say exactly how much of this energy is consumed in Europe. According to statistics, almost five percent of Bitcoin was created in Germany in August last year. There is no more recent data. It is also possible that German IP addresses were used, but the computers are located somewhere else, as the scientists themselves admit.
Only a few countries, like China, have decided to ban Bitcoin mining. These include Egypt, Iraq, Algeria and Tunisia. Some have also banned transactions. To reduce energy consumption, it would be enough to ban mining.
A large democracy like the EU, which could become a role model for others, has not yet dared to take such a step. The debate on this hardly gets going. Jean-Pierre Schweitzer from the European Environment Agency EEB observes that crypto is not yet a typical topic for environmental protection organizations, although enormous amounts of energy are involved. “The topic is probably too new or too complicated for many,” suspects Schweitzer.
The EU wants to regulate cryptocurrencies in the near future. But ecological aspects are not addressed in the drafts – to the annoyance of individual MEPs. The Spanish Green MP Ernest Urtasun refers to binding energy efficiency criteria in other sectors of the economy. “Why should cryptomining be an exception?”
And SPD politician Joachim Schuster says: “In terms of energy, Bitcoin is complete madness.” Transactions would also be concealed with Bitcoin. “Instead of cumbersomely regulating it, it should simply be banned – mining, transactions, ownership,” demands the social democrat.
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The EU Commission would have to take the initiative for this. According to a Commission representative, discussions are being held with member states on sustainability issues for cryptocurrencies. There are obviously no concrete plans for a ban. “The commission encourages the industry to migrate applications from very energy-intensive first-generation blockchains to more modern blockchain protocols,” it says.
A few weeks ago, Erik Thedéen, deputy chief of the European Securities and Markets Authority Esma, attracted attention to the topic. Between April and August 2021, electricity consumption for mining in Sweden had multiplied and is now as high as the consumption of 200,000 Swedish households, he wrote in a blog post: “Emissions must be stopped here and now, renewable energy is used for important purposes second hand.”
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There are four electricity tariff zones in Sweden. In the north, customers only pay around a third of what their compatriots in the south pay. Because in northern Sweden, hydroelectric power plants deliver cheap electricity. The routes are not sufficient to bring him south.
The Canadian company Hive is therefore digging for the cryptocurrency ether in Lapland, which, like Bitcoin, is created using the power-intensive “proof of work” method. His company uses the waste heat from the computers to heat greenhouses, swimming pools and indoor tennis courts, says CEO Frank Holmes.
Above all, Hive shuts down its data centers when demand from other electricity customers increases. This can actually be a model for the future: the more wind and solar energy there is in the grid, the more helpful it is if customers can react to a fluctuating supply. In times of strong wind and sun, wind turbines otherwise have to be regulated. The more wind turbines and solar panels installed, the more energy is lost.
Hydrogen producers will soon fill this gap. At that point at the latest, the assertion that cryptocurrencies are mined with electricity that is not in demand by anyone else would no longer be tenable.
According to Alfred Taudes, blockchain researcher at the University of Vienna, this is not particularly realistic. “In order for the investment in a bitcoin mine to be worthwhile, it has to run permanently. You can’t just run them when the sun is shining.”
The higher the Bitcoin price, the more junk
In addition, the hardware of crypto mines is replaced every year and a half to two years and the old devices are practically worthless. Scientists estimate the amount of e-waste generated as a result at 30,000 to 65,000 tons per year. The higher the bitcoin price rises, the more scrap there is. Taudes is still against a ban. “What makes sense and what doesn’t shouldn’t be decided by the regulator, but by the market,” he says.
Stefan Berger warns of the negative consequences of a ban. “We are at the beginning of a fascinating development,” says the CDU politician, who is responsible for the Mica directive on the regulation of cryptocurrencies in the European Parliament. “A lot of new things are emerging around cryptocurrencies, which can also trigger social changes. A ban would be hostile to technology.” Bitcoin is an innovation driver. The Mica Directive aims to regulate new cryptocurrencies from a monetary policy perspective. “If the European Parliament, especially the group of the Social Democrats and the Greens, wants to ban the ‘proof of work’ method, it makes itself ridiculous.”
Regarding the climate aspect, Berger says: “As long as Bitcoin is generated with renewable energy, I can’t see any problem.” His SPD colleague sees it differently: “We will always have a shortage in the next 30 years,” says Schuster. “That’s why we have to do without superfluous consumption.”
Modern alternatives have long existed. Newer cryptocurrencies rely on other processes that consume significantly less power. Many advantages of bitcoin, such as the simple and fast transactions, have been further developed for these currencies.
Ether is to be switched from the “proof of work” procedure to “proof of stake”. It is not the computing power that is decisive, but existing crypto assets. According to a report by the Crypto Carbon Ratings Institute research group, this method uses 0.001 percent of the energy consumed by Bitcoin mining. However, Ethereum has long announced the step without implementing it so far.
Technically, a conversion would even be possible with Bitcoin. However, the operators of the Bitcoin mines would have to agree on this, which would destroy their own business model. It is practically impossible for them to do so.
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