The production of Bitcoin through mining is an energy-intensive process – a fact which many critics are quick to point out. Compared to mining gold, however, which consumes more than twenty times the energy, mining Bitcoin isn’t quite the environment killer that critics make it out to be.
The Intricacies of Gold Mining
Pulling raw precious metals out of the ground is a very intensive process in terms of the time, labor, resources, and money required. Heavy machinery is required to dig up soil, wash the rocks and mud, and filter out the gold. In the end, the consumption of energy in gold mining is very high. So steep that it costs $87.3 billion per year to mine the world’s annual gold production. This figure is based on a 2017 report which does not provide a transparent overview of the total energy consumption.
Assuming those numbers hold up, it paints a worrisome picture. Diesel fuel plays an integral role in the mining of gold worldwide. Nearly 100 million barrels of crude oil power this industry every single year, according to analysts. Of course, mining Bitcoins uses oil as well, insomuch as most power plants around the world are still powered by fossil fuels (coal, natural gas, and oil).
It is estimated that the total electricity consumption for the entire Bitcoin network this year will reach just over 73 TWh. At the current conversion rate of 1 TWh = 588,440.75 barrels of crude oil, that works out to a total of just over 42 million barrels of crude oil. Even assuming that all of the energy needed is oil-generated – which it isn’t – Bitcoin mining still consumes less than half of the amount of crude oil than gold mining.
This does not mean that the gold mining industry needs to reduce its energy consumption. In fact, it seems impossible to do so under current circumstances. The scarce precious metal will only become more difficult to find and dig up. As such, its total energy consumption and associated costs will continue to rise over time. This is not unlike Bitcoin, which is also becoming more scarce over time.
The Bitcoin Mining Conundrum
Recent reports pertaining to Bitcoin mining show its energy consumption is very high. In fact, it is nearly equal to 70% of Ecuador’s total electricity output. Comparing one industry to nations always presents a rather skewed picture, but even so, Bitcoin mining consumes 0.07% of the global electricity capacity. This adds up to a total annual cost of $4.3 billion – less than 1/20 (one-twentieth) than that of mining gold.
Gold mining, on the other hand, consumes 0.27% of global oil production. Considering how oil is a fossil fuel and harmful to climate, mining gold seems to have more troublesome side effects. However, it is hardly ever mentioned in such a context these days. A lot of people seem focused on the downsides of Bitcoin mining as of right now.
In the end, mining Bitcoin is more efficient compared to gold mining. How long this correlation will favor cryptocurrencies, is difficult to predict. The interest in Bitcoin continues to rise. New mining operations are created in regions with plenty of access to renewable energy. As such, the total electricity consumption will rise accordingly. Scarcity pushes energy consumption to new levels, both for gold and Bitcoin alike.
What do you think about the comparison between Bitcoin and gold mining’s energy consumption? Will it matter to environment-focused Bitcoin critics? Let us know in the comments below.
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