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ARQ (Santiago)

versión On-line ISSN 0717-6996

ARQ (Santiago)  no.98 Santiago abr. 2018

http://dx.doi.org/10.4067/S0717-69962018000100032 

Readings

The weight of Bitcoin

Ethel Baraona Pohl1 

César Najera Reyes2 

1dpr-barcelona. Barcelona, España ethel.baraona@gmail.com

2dpr-barcelona. Barcelona, España cesareyes@gmail.com

Abstract:

Money must be one of the most successful human creations in terms of its extension and massiveness. Its forms, however, are multiple. For instance, we are witnessing today a cryptocurrency boom that threatens to render physical money obsolete. But, as this article sharply shows, no matter how digital a cryptocurrency is, its creation has physical effects on a massive scale, especially in terms of energy consumption and carbon footprint.

Keywords: crypto networks; blockchain; mining; energy consumption; carbon footprint

DC3D5A05CF60D112A44575843920D5F22CC868AF37E818570D1ADE9C3388D981

The code shown above is the cryptographic hash that univocally certifies the original document with the text you are about to read. It has been stamped with a digital service that uses blockchain data certification, which creates an immutable record of existence, integrity, and ownership for documents and files. The records certified are generated leveraging both the Bitcoin and the Ethereum blockchains. At first sight, both the vocabulary, the protocols, and the string of letters and numbers resulting of this process seem complicated, but the general concept behind the technology is simple and the outputs that it is producing are yet far from being completely developed. The name blockchain refers to a series of transactions bundled into ‘blocks’ of data that are written onto the end of a ‘chain’ of existing blocks describing all prior transactions.

Blockchain and decentralization

Crypto networks are distributed and community-governed networks, ruled by a blockchain-based crypto asset, for instance a cryptocurrency. Unlike centralized networks that need different kinds of certifiers, the decentralized ones rely on the confidence of the peers and use consensus mechanisms to maintain and update themselves. Cryptonetworks use rewards in the form of tokens or coins to enhance consensus among participants. This rewarding mechanism ensures that all stakeholders work towards the success of the network. Cryptonetworks favor the emergence of new kinds of assets that enable decentralized applications, as they are community-governed they can easily surpass the capacity of the most advanced centralized services (Dixon, 2018). Considering this, there is no surprise in the emergence of many entrepreneur initiatives and evangelists claiming they have the definitive alternative to central banks, to nation states and to supranational entities like the IMF.

The most well-known example of cryptonetworks is Bitcoin,16 a platform combining cryptography and software that offers an alternative currency and payment-tracking system. It is made possible by a distributed network that produces them and, at the same time, verifies each transaction. As part of a virtual system, they are not backed nor controlled by any government or corporation; allowing instant payments near to zero fees, available to everyone with internet connection. As gold, it is recognizable, divisible and limited. According to its monetary exchange rate, it seems it's worth its weight in gold and apparently this weight is much easier to transport.

Bitcoin Energy Consumption

But just like the internet with its apparent virtuality, the processes required to create and exchange cryptocurrencies are done in a real-world site, and they need physical infrastructures. Mining Bitcoins is high-energy consuming and requires specialized hardware and installations. The vision of a single digital-money fanatic mining Bitcoins in the loneliness of a home computer is now part of its short history while mining has moved to data centers and other larger infrastructures.

In January 2018, the milestone of 80 % of the maximum of 21 million mineable Bitcoins was reached. As the process of mining gets harder the value of a single Bitcoin has dramatically pushed over the last year.17 This has also led to the growing of Bitcoin mining up to industrial scales. The market of mining is similar to that of the data center industry and has witnessed the rise of startups producing the necessary equipment and setting installations in locations with favorable climate conditions or with low-cost electricity to cool overheated equipment18 (Figure 1).

Source: Digiconomist

Figure 1 Bitcoin Energy Consumption Index Chart. April 2017 - January 2018. 

Why Bitcoin mining is so energy consuming? Each block of Bitcoin transactions must be encoded in an iterative process called ‘cryptographic hashing.’ Every block contains the hash of the preceding block, thus each block has a chain of blocks that together contain a large amount of work. In order for a block to be accepted by network participants, miners must complete a proof of work which covers all of the data in the block.19 Proof of work in Bitcoin mining is deliberately designed to be computationally intensive and it consumes lots of energy; as it is extremely expensive to create blocks that won’t be backed nor rewarded by the network, this feature is aimed at preventing fraud.

Don’t forget that computers are basically engines that transform energy into waste heat and mathematical work (Bennett, 1982). In addition to the ecological footprint of their fabrication, we should consider the energy that makes them work, and the material basis that makes all this possible, as “no agent can create the material on which it works. Nor can capital create the stuff out of which it is made” (Georgescu-Roegen, 1979). The digital world runs on electricity which, given our current consumption patterns, rely mainly in fossil fuel consumption (Ritchie & Roser, 2018). As a result of that, the simplest digital task has a real carbon footprint (Table 1).

Table 1 Key Bitcoin Network Statistics. February 2018.  

In addition to Bitcoin mining massive energy consumption, we have the material basis that fuels the network. The main Bitcoin mining operations are based in China (58 %) where electricity is available at very low rates, mainly based on coal-fired power plants, followed by the U.S. with 16 % (Hileman & Rauchs, 2017). More recently Georgia and Iceland have emerged as Bitcoin-friendly countries, relying on their hydropower and geothermal potential, as well as more favorable climatic conditions for cooling operations. There are several accountabilities underway trying to figure out as approximate as possible the energy consumption of Bitcoin production. Initiatives like the Economist’s Bitcoin Energy Consumption Index,20 or the Blockchain Charts21 monitor and update data about its energy consumption and costs, while at the same time, make comparatives to nation-state electricity spend.

There is no consensus on how the Bitcoin energy consumption calculations are made. Some analyses take into consideration the network ‘hashrate’, but it's practically impossible to know exactly what does it mean in terms of energy consumption as there is no a centralized register with all active machines mining and the means they use to cool down systems and network gear. In this article, we will refer to the Bitcoin Energy Consumption Index which accurately relates miner incomes and operational costs. Their advocates argue that the higher the mining revenues are, the more energy-hungry machines that can be supported.22

To the day this text was written, it was estimated that the energy consumption of Bitcoin mining was around 50.88 TW/h, which means a carbon footprint of 24,930 kt of CO2.23

These numbers are so huge that it is difficult to have a realistic idea of what they represent. A common approach is to compare the Bitcoin mining consumption with the amount of energy spent by countries. Thus, in 2017 it was estimated that Bitcoin energy consumption was higher than the consumption of 159 countries, based on a report by the International Energy Agency.24 If Bitcoin were a country, its 50.88 TW/h of energy consumption would be higher than the yearly energy consumption of Portugal, just behind Uzbekistan, as shown in Figure 2.

Source: Digiconomist

Figure 2 Bitcoin Energy Consumption as if a Country. January 2018. 

Eat your Bitcoins

As a thought experiment, we propose to think of Bitcoins in terms of food. It’s obvious that we cannot eat them, but what if the resources devoted to its production were relocated towards the production of food? We won't delve into the environmental convenience of current food production methods, but simply compare what would we have achieved if instead of mining Bitcoins we would have produced food. When talking about ecological footprint, studies often refer to the CO2 emissions from a certain activity - this index makes reference to the area of forest necessary to absorb the CO2 generated by energy consumption, either directly or to produce the goods of consumption of a certain population or by certain transformation process. Focusing on consumption patterns and taking as an example the consumption of meat, we have that to produce 1 kg of lamb meat, around 39.2 kg of CO2 are issued. We could relate this to the annual data from Bitcoin mining:

24,930,000,000 kg / 39.2 kg = 635,969,387 kg of lamb meat = 635,969 tons

Table 2 shows the greenhouse gas emissions produced by one kg of various food products. It includes all the emissions produced along the whole process, including those generated in the farm, in the factory, on the road, in the shop and at home. Meat, cheese and eggs have the highest carbon footprint; while fruit, vegetables, beans and nuts have much lower values.25 The table also shows the tons of food that the same energy consumption would have produced, if instead mining Bitcoins it would have been used for food production.

Table 2 CO2 emissions in food production and food production with Bitcoin energy consumption. 

It’s difficult to get the sense of bulk numbers of tons of food shown above. According to FAO26 the production of rice in Central America for 2016 was 1,216,683 tons; considering CO2 emissions, Bitcoin mining consumption would produce 7.5 times that number. If we talk about beef, the amount would be enough to cover Colombia (818,318 t) and Panama (70,999 t) together, or 4 times the Chilean production (215,266 t). The data is surprising if we consider whole milk production in the American continent for 2014, which was around 260,000 tons. According to the data above, Bitcoin emissions would be the equivalent to the emissions of producing whole milk for 50 American continents. If we talk about lentils, then we have that the world production for 2016 was 6,315,858 tons, so the same amount of CO2 emission of Bitcoin mining would provide 4.4 times the production of lentils to the entire world. (Figure 3)

Source: powercompare.co.uk/bitcoin

Figure 3 Global Bitcoin Mining consumption compared to each country’s electricity consumption. 

Build with Bitcoins

Another illustrative approach would be to compare the CO2 emission of Bitcoin mining with those of the materials used in construction. We don’t intend to make an exhaustive life-cycle analysis but just show as graphically as possible that such digital activity has a series of hidden environmental costs which are not being discussed in depth yet.

To show this, we will rely on the carbon dioxide intensity ratio (CDIR) proposed by MacMath and Fisk, which is defined as the ratio between the net upstream CO2 impact (emissions minus storage) of a material and the weight of the material. Following their classification, it appears that most metal, synthetic, organic, and ceramic building materials are net sources of CO2 emissions, while natural organic or biomass building materials appear to be net CO2 sinks. This is due to their capacity to absorb CO2 (MacMath & Fisk, 2000).

If we take the CCTV Headquarters building in China by OMA, we have that 123,750 tons of steel were used for its construction (Baraona Pohl, 2008), which would represent 191,812 tons of CO2 according to the CDIR ratio (Figure 4). Then, if we apply the same simple arithmetic formula for tons of emissions, then we would have the following:

24,930,000 t / 191,812 t = 130 CCTV buildings

Figure 4 Steel consumption and tons of CO2 emissions of some iconic buildings. 

In the case of the Burj al Arab building in Dubai, with 13,950 tons of CO2 due to steel, the result of the same equation would be 1,788 buildings. In the case of vernacular architecture, like Hakka walled houses in China, the comparison is practically impossible due to their near to zero carbon emissions.

The comparisons become more striking if instead of iconic architecture, we refer to housing. If we estimate that the carbon footprint of a new house in the UK is 80 tons of CO2 (Berners Lee, 2018), then we would be able to build 311,625 units. If we go further and consider the emissions of a low carbon house with A certification (10.1 kg CO2 /m2 year),27 Bitcoin emissions would amount to 33 million houses of 75m2.

If we talk in terms of cement, we can also draw more striking conclusions (Figure 5). Following data from to the Global Carbon Atlas, the Bitcoin footprint is higher than the CO2 cement emission of the Russian Federation (21000 kt) in 2016. If included in this table, Bitcoin would rank number 13, just after Iran, with (26,000 kt).28

Source: Global Carbon Project

Figure 5 CO2 Cement emissions in 2016. 

Referring to national database sources presents some difficulties, as the emissions resulting from extraction and transport may substantially differ from one place to another. Primary production and the use of recycled products are also factors to take into account. This is why this kind of comparisons should be only taken as a pedagogical tool to communicate in a graphical way alternative interpretations of Bitcoin mining, which are mainly broadcasted by their economic profitability. The figures above foster a different understanding of the massive amount of emissions devoted to an activity that, however promising, has a scarce application in daily life activities.

Money is the easy part

We have seen that one of the main characteristics of Bitcoin cryptonetwork is that it is high energy consuming. It’s clear that mining Bitcoins is an activity reserved for the very few who control immense computing power, as the proof of work system demands infrastructure and electricity expenditures that are prohibitive for domestic peers. On the other hand, it’s not clear that its use as an alternative currency and payment system will be undoubtedly adopted for retail transactions, especially because the process of setting up a wallet, acquiring Bitcoins and find retailers willing to accept them is an unwieldy process.29 What exactly is happening in the fields of economy, hacking, and social and digital innovation, if a tool that didn't effectively succeed as a currency is still triggering so much attention? Should we accept that the thermodynamic cost of Bitcoin has simply placed it in the Olympus of expensive toys, whimsically developed by humankind, like cars and weapons?

Maybe we shouldn’t understand Bitcoin and its sibling cryptocurrencies just as a new kind of money, something that capitalism’s inertia has made us think with greedy enthusiasm. “Abstracted from the question of value exchange, the blockchain offers us a tool of surprisingly broad utility that we didn’t know we needed, and didn’t even have a language to properly describe, until it was dropped in our laps” (Greenfield, 2017). The idea of a distributed autonomous organization latent in blockchain has powerful implications. We might disagree with Mark Fisher (2009) when he noted that: “not only capitalism is the only viable political and economic system, but also it is now impossible even to imagine a coherent alternative to it.”

If we get rid of the monetary function as the leitmotif of these decentralized systems, we can substitute the high energy demanding proof of work, which is mainly an economic protection measure. Then, we can focus on the emergence of trust infrastructures, distributed governance and decentralized ways of collaboration built on blockchain concepts. Initiatives powered by blockchain technology like FOAM, DOMA, and Phi are examples of some of the possibilities of decentralized autonomous organizations with specific spatial manifestations in urban and rural contexts.30 The implications of this new kind of assembles surpass many of the institutions we see as immutable, as state nations or supranational financial authorities. The new set of concepts including ‘smart contracts,’ ‘non-human peers,’ ‘autonomous consensus,’ or ‘distributed benefits’ shouldn’t make us forget that there are always hidden fluxes that make our human constructions work. Energy is important, but so is the material base that sustains it, and we cannot abstract ourselves from the thermodynamic cost of our stuff and the tools to make it. The series of concepts and tools we’re developing might be difficult to manage by a single mind, but we are also exploring the power of the collectivity to adjust their dissonances.

Referencias

BARAONA POHL, Ethel. Watercube. The Book. Barcelona: dpr-barcelona, 2008. [ Links ]

BENNETT, Charles. “The Thermodynamics of Computation-a Review.” International Journal of Theoretical Physics 21 (12, 1982): 905-40. [ Links ]

BERNERS LEE, Mike. “What's the carbon footprint of building a house?” The Guardian, Oct, 14, 2010. < https://www.theguardian.com/environment/green-living-blog/2010/oct/14/carbon-footprint-house> Accessed February 21, 2018. [ Links ]

DIXON, Chris. “Why Decentralization Matters?” Medium. February 18th, 2018. https://medium.com/@cdixon/why-decentralization-matters-5e3f79f7638e Accessed February 22, 2018. [ Links ]

FISHER, Mark. Capitalist Realism. Is there no Alternative? Winchester: Zero Books, 2009. [ Links ]

GEORGESCU-ROEGEN, N. “Comments on the Papers by Daly and Stiglitz.” In: Smith, V., editor, Scarcity and Growth Reconsidered. New York: Resources for the Future Press, 1979. [ Links ]

GREENFIELD, Adam. Radical Technologies. Brooklyn, NY: Verso, 2017. [ Links ]

HILEMAN, Garrick; RAUCHS, Michel. Global Cryptocurrency Benchmark Study. Cambridge: Center for Alternative Finance, University of Cambridge, 2017. [ Links ]

MACMATH, Richard; FISK, Pliny. “Carbon Dioxide Intensity Ratios: A Method of Evaluating the Upstream Global Warming Impact of Long-Life Building Materials.” Center for Maximum Potential Building Systems, Austin, TX, 2000. [ Links ]

RITCHIE, Hannah; ROSER, Max. “Energy Production & Changing Energy Sources.” OurWorldInData.org, 2018. < https://ourworldindata.org/energy-production-and-changing-energy-sources > Accessed February 16 2018 [ Links ]

* Ethel Baraona Pohl Critic, writer and curator. Co-founder of the independent research studio and publishing house dpr-barcelona, which operates in the fields of architecture, political theory and the social milieu. Editor of Quaderns d'arquitectura i urbanisme from 2011-2016, her writing appears in Open Source Architecture (Thames and Hudson, 2015), The Form of Form (Lars Muller, 2016), Together! The New Architecture of the Collective (Ruby Press, 2017), and Harvard Design Magazine, among others. Associate curator for Adhocracy, Istanbul Design Biennial (2012) and exhibited at the New Museum, NYC (May 2013) and Lime Wharf, London (summer 2013); also co-curator of Adhocracy ATHENS at the Onassis Cultural Centre, 2015. Director of Foros, the architecture lecture series of the UIC Barcelona School of Architecture in 2017.

* Cesar Reyes Najera Architect, PhD in Bio-climatic Construction Systems and Materials. Co-founder of the independent research studio and publishing house dpr-barcelona. His research and theoretical work is linked to leading publications in architectural discourse, including Archis advisor for Volume magazine. His writing can be found in architecture books, both printed and digital, such as Architecture is All Over (Columbia Books on Architecture and the City, 2017), (On the Floating World of) the FX Beauties (Christine Bjerke (ed.), 2017) Archifutures vol. 1: The Museum (dpr-barcelona, 2016), Uncube and Continent, among others. Co-curator of the third Think Space program with the theme ‘Money,’ and co-curator of Adhocracy ATHENS at the Onassis Cultural Center, 2015. His practice, dpr-barcelona is member of Future Architecture platform.

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