BusinessDay

China’s crackdown on cryptocurrency miners reduces carbon emissions

China’s crackdown on cryptocurrency miners who use vast amounts of energy thus driving up the country’s carbon emissions is helping to lower its emissions.
According to analysis by Rystad Energy, until recently, China’s bitcoin production used to emit as much CO2 as the whole country of Portugal, a whopping 57 million tonnes (Mt) annually.

China mined about 65 percent of the world’s total bitcoin using electricity that was 63 percent coal-fired in 2020. This means that at least 40 percent of the bitcoin mined globally was powered solely by burning coal in China.

Around 7,815 terawatt-hours (TWh) of electricity was produced in China last year. In addition to coal, hydropower plants supply about 17 percent and the remaining 20 percent comes from a mix of other sources including wind, nuclear, gas and solar. Bitcoin mining in China is estimated to require 86 TWh of electricity per year, or 1.1 percent of China’s total electricity demand.

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The estimated carbon emissions from China’s total power production were around 5,200 Mt last year, most of which was emitted by coal power plants across the country. Applying this to the share of electricity used by bitcoin production, total carbon emissions from this activity would be around 57 Mt – a level similar to the total emissions of countries like Portugal or Peru, Rystad energy said.

“Even though the share of emissions from bitcoin mining in China remains small compared to other economic activities, it still makes sense for the Chinese government to curb production of cryptocurrency as the energy intensity of this activity is very high. This is one of the many sectors that China needs to target to meet its pledge of becoming carbon neutral by 2060 and reach peak emissions by 2030,” said Carlos Torres Diaz, Head of Rystad Energy’s power and gas research.

Cryptocurrencies are based on “blockchain”, a record-keeping technology serving as a digital ledger for transactions. In bitcoin’s case, blockchain is used in a decentralized way so that no single authority has control – instead, numerous processing units of the network collectively retain control.
New cryptocurrency units are “mined” into existence as “rewards” when a computing unit solves a complex mathematical problem to validate an existing cryptocurrency transaction.

The energy consumption problem arises from many specialized processing units competing for the same reward and are doing the very same computing in parallel. Secondly, bitcoin uses a “proof-of-work” (PoW) mathematical system with a complex mathematical problem to mine new bitcoins and verify transactions.
This mathematical problem can only be solved by trial and error, and the odds of solving the problem are about 1 in 6 trillion. This requires substantial computing power, which uses considerable amounts of energy.

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