Earlier this month, a peer-reviewed article in a trade journal concluded that carbon dioxide emissions from Bitcoin mining could seriously undermine China’s climate change goals without political intervention.
The report, co-authored by researchers from various Chinese universities and published in Nature Communications, immediately inspired similar-sounding headlines in a variety of mainstream media, including the BBC, CNN, The guard, economist, CNBC and other.
The authors wrote that the annual energy consumption of Bitcoin mining in China is expected to peak at 296.59 terawatt hours (tWh) in 2024 and generate 130.50 million tons of carbon dioxide emissions. This would exceed the Czech Republic and Qatar’s annual greenhouse gas emissions and jeopardize China’s long-term drive to become climate neutral.
What was decisive, however, was that, according to the critics of the paper, the researchers left two fundamental questions unanswered: Where exactly are the mining machines located and what is the energy mix like there?
“I expected most of the paper to be on provincial level data covering the energy mix of Chinese miners,” said Nic Carter, partner at Castle Island Ventures and co-founder of Coin Metrics. wrote on twitter. “But that’s missing. Instead, they claim to have taken this into account … but don’t show their work (!). They just claim that they have quantified this. “
In the article, the researchers said they explained carbon dioxide emissions from both hydropower and fossil-fuel bitcoin mining in China. “As shown by the current regional statistics of Bitcoin miners, we assume that 40% of miners are in the coal area,” they write. However, you have not elaborated on the origin of these “regional statistics”.
After The Block asked the co-authors to clarify this question, Shouyang Wang, the chair professor of the Academy of Mathematics and Systems Science of the Chinese Academy of Sciences, replied:
“We got the statistics of the transmission location of each mining pool from BTC.com. Based on the location of each mining basin and the associated region, we can assume that approximately 40% of the miners are in the coal-fired area. “
In a follow-up message, Wang explained what the authors mean by “transmission location of each mining pool”:
“BTC.com’s regional pool statistics suggest a split of around 60% to 40% between water-rich and coal-intensive regions in China. The ratio corresponds to the computing power reported from Shenzhen (server location closer to water-rich regions) to Beijing (server location closer to coal-intensive regions). “
According to Wang’s statement, the researchers based this assumption on another: the location of the mining basin corresponds directly to the location of the individual miners. However, this would be a misunderstanding of how Bitcoin miners and pools work in practice.
Bitcoin mining pools collect the hashing power of all individual miners who want to connect to their service in order to jointly mine blocks of mines. Although F2Pool is based in Beijing, that doesn’t mean the miners associated with the pool are also there. In fact, they can come from anywhere in China or from anywhere in the world.
Wang also confirmed that they have not received internal statistics on the exact geolocation of each of their mining customers from any major mining pool. Instead, they used data from Cambridge University, “which showed that 40% of the hash rate as of April 2020 comes from coal-intensive regions like Xinjiang and Inner Mongolia,” Wang said.
However, Cambridge University data is a year out of date and the makeup of the mining network is constantly changing. For example, China’s share of the total mining capacity of the Bitcoin network has declined significantly over the past 12 months.
Impossible to measure?
Assumptions aside, the debate over the report’s methodology raises a question that is increasingly difficult to ignore as Bitcoin and other cryptocurrencies find their way into the mainstream: How can the energy mix of the Bitcoin network be accurately measured?
The reality is that the decentralization of bitcoin and bitcoin mining is making it incredibly difficult to quantify how much energy the network is getting from renewable energy sources or not – let alone estimating the carbon emissions associated with it.
The Cambridge Center for Alternative Finance has made one of the most recent attempts to answer the question with its Cambridge Bitcoin Electricity Consumption Index (CBECI).
The CBECI estimates the total energy consumption of Bitcoin with a theoretical lower and upper limit of between 35 and 391 terawatt hours per year. The lower bound assumes that all miners are constantly using the most energy efficient hardware, and the upper bound assumes that all miners are constantly using the least efficient hardware.
The researchers behind the CBECI then give a “best guess estimate” – based on the assumption that miners are using “a basket of profitable hardware instead of a single model” – that the network consumes 113.88 terawatt hours annually. That’s about the same amount that the Netherlands consume.
The CBECI also provides a geographic breakdown of the Bitcoin hash rate based on data provided by three Bitcoin mining pools: BTC.com, Viabtc and Poolin. Reports Mining map As of April 2020, miners in China’s Xinjiang and Inner Mongolia – two fossil fuel-based regions – accounted for around 40% of the world’s hash rate. Hydropower provinces like Sichuan and Yunnan accounted for around 25% a year ago, according to the CBECI.
However, those numbers haven’t been updated since April 2020, and the data comes from just three mining pools, which together make up only 35% of Bitcoin’s total hash rate. In addition, only the geographic breakdown of the hash rate was recorded on the CBECI mining map from September 2019 to April 2020, a time known as the dry season in China.
In a disclaimer, the CBECI states: “In some countries, and especially in China, the mining operations tend to move between locations depending on the seasonal variance in the production of renewable energies. These migration patterns can only be observed if a longer time frame is selected for analysis. “
During the dry season, numerous miners in the southwestern Chinese provinces of Sichuan and Yunnan move north to Xinjiang or Inner Mongolia, where the energy mix is usually based on coal. After the return of the rainy season, which extends from May to September, some may return to the south where the mix contains much more hydropower.
More accurate billing would require years of collaboration from sufficiently large Bitcoin mining pools to achieve a large portion of the hash rate. And it would not only need the IP geolocation of every mining machine – whether in Sichuan, Yunnan, Xinjiang or Inner Mongolia – but also the exact model of every mining machine.
This is because bitcoin mining machines have evolved significantly over the past few years and some old models are still in use. For example, to calculate the same hash rate, the five-year-old AntMiner S9 from Bitmain uses four times as much power as the most efficient model currently on the market, the AntMiner S19 Pro.
It is next to impossible to know the exact makeup of the machines used, especially during a bull market when a large number of old models can still be used to make a profit.
Another theoretical approach – albeit an even longer one – would be to convince the energy authorities in different countries to determine how many bitcoin miners there are on site and how much energy they are using.
© 2021 The Block Crypto, Inc. All rights reserved. This article is for informational purposes only. It is not offered or used as legal, tax, investment, financial or other advice.