A recent study suggests that every Bitcoin transaction consumes an average amount of water equivalent to filling a backyard swimming pool.
This figure is estimated to be approximately six million times more than the water used in a typical credit card transaction. The study, conducted by Alex de Vries of Vrije Universiteit Amsterdam, attributes this significant water usage to the power and cooling requirements of the millions of computers worldwide that support the Bitcoin network.
The environmental impact of Bitcoin’s water consumption is particularly concerning as many regions are already grappling with fresh water shortages. Currently, up to three billion people globally face water shortages, and this situation is expected to worsen in the future.
“This is happening in Central Asia, but it’s also happening in the US, especially around California. And that’s only going to get worse as climate change gets worse,” Mr de Vries said.
In 2021 alone, Bitcoin is estimated to have consumed nearly 1,600 billion liters (gigalitres) of water, and projections suggest that this figure could rise to over 2,200 gigalitres in 2023.
The primary reason behind Bitcoin’s substantial water usage lies in its dependence on extensive computing power, which, in turn, demands vast amounts of electricity. Bitcoin’s energy consumption is so significant that it closely rivals the entire electricity consumption of Poland, as indicated by Cambridge University data. Water is used for cooling gas and coal-fired power plants that supply electricity, and evaporation from reservoirs supporting hydroelectric plants also contributes to water loss.
Alex de Vries argues that Bitcoin’s excessive water usage is not necessary, pinpointing the resource-intensive process at its core known as “Bitcoin mining.” In this process, miners compete to audit transactions for a chance to obtain the digital currency. The competitive nature of this process results in redundant work, with the same transaction being audited multiple times by numerous energy-intensive computers.
“You have millions of devices around the world, constantly competing with each other in a massive game of what I like to describe as ‘guess the number’,” Mr de Vries told the BBC.
“All of these machines combined are generating 500 quintillion guesses every second of the day, non stop – that is 500 with 18 zeros behind it.”
This approach, known as “proof of work,” can be modified to significantly reduce electricity consumption and, consequently, water usage.
An alternative method, “proof of stake,” was adopted by the major cryptocurrency Ethereum in September 2022, leading to a more than 99% reduction in its power usage.
However, implementing such changes in Bitcoin might be complex, according to Prof James Davenport of the University of Bath.
“[It was] only possible because the management of Ethereum is significantly more centralised than that of Bitcoin,” he told the BBC.
Dr. Larisa Yarovaya, an associate professor of finance at the University of Southampton, expressed concern over the use of freshwater for Bitcoin mining, particularly in regions already facing water scarcity. She emphasised the need for regulators and the public to address this issue as a cause for concern, highlighting the potential environmental impact of Bitcoin’s water-intensive operations.
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