Bitcoin's Water Consumption: Is It A New Environmental Threat?

Bitcoin’s Water Consumption: Is It A New Environmental Threat?


New studies have examined the rate of water consumption of Bitcoin (BTC) with alarming results.

Bitcoin, the world’s biggest crypto, has long been scrutinized for its environmental impact because of the energy-intensive nature of its mining process.

Since its launch in 2008, Bitcoin has never been hacked. Its extensive security, offered by its proof-of-work (PoW) consensus mechanism, provides value for the cryptocurrency. PoW, nonetheless, is energy-intensive and it relies heavily on complex cryptographic algorithms that need lots of computational power.

The global popularity of Bitcoin has resulted in its network energy consumption sitting at 147.61 terawatt-hours annually as of December 7, near the yearly average consumption of nations like Ukraine, Poland, and Malaysia, based on a study by the University of Cambridge.

Bitcoin’s PoW consensus mechanism has already become an immutable security assurance, but some see it as a huge environmental threat.

While the Bitcoin mining sector appears to continuously shift to renewable energy sources to address these challenges, new studies now point toward another ecological problem: the high water consumption involved in crypto mining.

Related:Bitcoin Network Under Threat: NVD Highlights Serious Inscription Vulnerability

Bitcoin mining water consumption

Bitcoin Mining’s Increasing Thirst For Water

A recent research titled “Bitcoin’s growing water footprint,” done by Alex de Vries — a data analyst and researcher working at Vrije Universiteit Amsterdam and De Nederlandsche Bank (DNB) — found that Bitcoin’s rate of water consumption can harm the environment.

The Bitcoin mining space has grown annually and keeps reaching new all-time high hash rates. The trend is expected to continue as the price of BTC surges.

As with all computers, cooling is important for mining devices to function optimally.

Bitcoin mining rigs have hundreds of machines that reach very high temperatures as they try to solve the complex mathematical challenges PoW presents.

Water is mostly used for cooling systems and air humidification systems. Moreover, water might be indirectly used to generate electricity.

As the study highlights:

“The water footprint of Bitcoin in 2021 significantly increased by 166% compared with 2020.”

De Vries acknowledges the challenges involved in quantifying the direct water footprint because of limited public information. Nonetheless, with the available data combining indirect and direct water consumption, he estimates that the total yearly water footprint for the US Bitcoin miners may range from 93 to 120 gigalitres (GL), which translates to the average yearly water consumption of about 300,000 US households.

Moreover, Riot Platforms, one of the biggest Bitcoin miners globally, is constructing a new mining facility located in Texas, which will increase the total water footprint to 121.2–147.8 GL, as per de Vries.

According to all the collected data, de Vries told the BBC that each Bitcoin transaction uses, on average, enough water to fill a backyard swimming pool. As this study outlines:

“With the network handling 113 million transactions in 2020 and 96.7 million in 2021, the water footprint per transaction processed on the Bitcoin blockchain for those years amounted to 5,231 and 16,279 L, respectively.”

Moreover, de Vries told the BBC that an approximated 6 Million times as much water is consumed with every Bitcoin transaction than is consumed in a normal credit card swipe. The statement was mainly based on data from another recent report titled “The water and carbon footprint of cryptocurrencies and conventional currencies.” Based on his calculations, conventional cashless transactions consume around 2.6 milliliters of water.

De Vries also introduces a controversial solution for this heavy resource consumption of Bitcoin: changing its validation protocol from PoW to PoS.

Ethereum (ETH) recently made a critical change, reducing its energy demand by 99%. However, with the change came an unavoidable expense: centralization. One of Bitcoin’s core existential values is to remain decentralized and independent of any dominating party.

Is That Cost per Transaction Accurate?

This study is biased according to ClimateTech investor Daniel Batten. He said that De Vries is an employee of the DNB, the Dutch Central Bank. As Batten stated on X:

“Bitcoin’s energy usage has the potential to be a positive environmental externality on its own merits because that energy use is predominantly sustainable, highly flexible, incentivizing renewable development (backed up by research and quantified now), using curtailed and stranded energy that others cannot, stabilizing the intermittency of renewable power on grids and, most importantly, allowing us to mitigate methane. PoS-based blockchains have none of these potential use cases.”

Batten also pointed out that Cambridge University previously argued that criticizing Bitcoin based on the supposed energy cost per transaction is not fully accurate, as:

“Transaction throughput (i.e., the number of transactions that the system can process) is independent of the network’s electricity consumption. Adding more mining equipment and thus increasing electricity consumption will have no impact on the number of processed transactions.”

Additionally, one transaction on the Bitcoin blockchain might include hundreds of payments or even represent billions of time-stamped data points using open protocols.

He disputed that measuring the water use per transaction may therefore be similarly misleading.

De Vries told reporters that the indicator is just “an efficiency metric that captures the average water use per transaction processed on the Bitcoin blockchain for the years 2020 and 2021.”

Batten also alleged that no recent studies about Bitcoin’s use of renewable energy or similar positive aspects of crypto mining were considered in de Vries’ studies and reports.

Related: Don’t Know What Bitcoin Mining Is? Here is a Complete Guide

Bitcoin Mining Can Help Countries With Water Scarcity

It is known that Bitcoin mining needs a high amount of energy. Any industrial process that consumes energy will result in water consumption. Nonetheless, unlike most of the other industries, Bitcoin mining is location-agnostic. Thus, Bitcoin miners can operate virtually from any place where electricity and the internet are available.

Batten demonstrates in his blog how Bitcoin mining might, theoretically, actually assist nations facing water scarcity, noting it is estimated that nearly 20 nations will suffer from high and extremely high water scarcity by 2040.

The Middle East and North Africa are among the driest regions in the world. In these regions, the situation is extreme, with a constant drop in rainfall in the past 30 years, which has made nations use more water than they receive.

As the professor of hydrology at the University of Birmingham, David Hannah, told CNBC, the Middle East:

“Has very limited conventional water resources, and some of the groundwater resources are saline.”

These nations have started to use desalination, but making potable water via the process is quite expensive and energy-intensive.

Naturally, the Middle East is the area most reliant on desalination. The sector is important for residents’ survival, so nations like the United Arab Emirates have already announced ambitious plans to power the desalination plants. The UAE is in the process of constructing one of the most extensive solar ecosystems in the world, looking to create a capacity of 5 gigawatts by 2030.

Based on this information, how could Bitcoin mining benefit nations with water scarcity that need desalination? Batten builds his argument on two points.

First, Bitcoin miners may speed up the buildout of renewable power for the desalination process. Any electricity provider will encounter the issue of excess capacity. The overproduced energy cannot be stored easily, so it becomes wasted if no consumers are available.

Renewable energies like solar power create infinite electricity but they do so irregularly. Moreover, the perfect location for producing energy might be isolated from its consumers.

Bitcoin and water consumption

Bitcoin miners are the ideal fit since they are potential buyers of the excess solar-powered electricity. That fact might help accelerate the setup of new solar energy capacity, as developers can rest assured they have buyers to rely on before they launch the project. Consequently, Bitcoin mining can help in transitioning to renewable-power desalination, and the UAE could meet its water security goals without having to endanger its emission-reduction targets.

Secondly, Bitcoin mining may boost the efficiency of the operational production of desalination. Efficiency gains in operating costs mean that water can be desalinated to nearly the operating cost.

Both technologies can actively complement each other. Heat is utilized directly for desalination, and nearly 100% of the energy used by Bitcoin mining rigs is changed into heat.

The produced heat energy can be used directly for desalination but with the caveat of earning revenue from mining Bitcoin. Eventually, there is an improvement in the water-per-dollar ratio, resulting in more desalinated water for the same net cost.

Generally, a point critics of Bitcoin mining seem to miss is the potential adoption by the renewable energy sector.

Related:Do You Really Need Deep Pockets for Bitcoin Mining?

Bitcoin: To Be Or Not To Be?

Bitcoin has long had a negative public image about its environmental impact. One way to promote its benefits and usability is to present empirical facts that demonstrate that crypto mining can use all energy created and result in favorable economics.

Based on a statement by Batten, the Bitcoin mining narrative is already beginning to shift. From him:

“The higher use of sustainable energy, better data visibility and quality independent reporting, and publications such as the KPMG and IRM [Institute of Risk Management] reports and the ACS Sustainability Journal — authored by a decorated scientist who is highly regarded in his field — showing how Bitcoin mining ‘supercharges’ the renewable transition” could be a catalyst for this new era for Bitcoin’s public image.”

The dilemma is whether Bitcoin or a decentralized digital currency is considered a valuable tool for the global community. If not, then Bitcoin’s mining energy is a complete waste. If yes, then its energy use is an important investment for a future with a currency for the people.


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