CEEPR Working Paper 2018-018, December 2018

Christian Stoll, Lena Klaaßen, Ulrich Gallersdörfer

In 2008, Satoshi, the pseudonymous founder of Bitcoin, published a vision of a digital currency, which only a decade later reached a peak market capitalization of over $800 billion (CoinMarketCap, 2018; Nakamoto, 2008). The revolutionary element of Bitcoin was not the idea of a digital currency in and of itself, but the underlying blockchain technology. Instead of a trusted third party, incentivized network participants validate transactions and ensure the integrity of the network via the decentralized administration of a data protocol. The distributed ledger protocol created by Satoshi has since been referred to as the ‘first blockchain’ (Yaga, Mell, Roby, & Scarfone, 2018).

During 2018, the computing power required to solve a Bitcoin puzzle increased more than threefold, and heightened electricity consumption accordingly (Blockchain.com, 2018; de Vries, 2018). Speculations about the Bitcoin network’s source of fuel have suggested, among other things, Chinese coal, Icelandic geothermal power, and Venezuelan subsidies (The Economist, 2018). In order to keep global warming below 2°C – as internationally agreed in Paris COP21 – net-zero carbon emissions during the second half of the century are crucial. (UNFCCC, 2015). To take the right measures, policy makers need to understand the carbon footprint of cryptocurrencies.

We present a techno-economic model for determining electricity consumption in order to provide an accurate estimate of the carbon footprint of Bitcoin. Firstly, we narrow down the power consumption, based on mining hardware, facilities, and pools. Secondly, we develop three scenarios representing the geographic footprint of Bitcoin mining, based on pool server IP, miners’ IP, and device IP addresses. Thirdly, we calculate the carbon footprint, based on the regional carbon intensity of electricity consumption. In comparison to previous work, our analysis is based on empirical insights. We use hardware data derived from recent IPO filings, which are key to a reliable estimate of power consumption as the efficiency of the hardware in use is an essential parameter in this calculation. Furthermore, we include assumptions about auxiliary factors which determine the power usage effectiveness (PUE). Losses from cooling and IT-equipment have a significant impact, but have been largely neglected in prior studies.

Besides estimating the total power consumption, we determine the geographical footprint of mining activity based on IP addresses. This geographical footprint allows for more accurate estimation of carbon emissions compared to earlier work.

We show that, as of November 2018, the annual electricity consumption of Bitcoin ranges between 35.0 TWh and 72.7 TWh, with a realistic magnitude of 48.2 TWh. We further calculate that the resulting annual carbon emissions range between 21.5 and 53.6 MtCO2; a ratio which sits between the levels produced by Bolivia and Portugal.

The magnitude of these carbon emissions, combined with the risk of collusion and concerns about control over the monetary system, might justify regulatory intervention to protect individuals from themselves and others from their actions.



Blockchain.com. (2018). BlockchainCharts. Retrieved from https://www.blockchain.com/charts

CoinMarketCap. (2018). Cryptocurrency Market Capitalization. Retrieved from https://coinmarketcap.com

de Vries, A. (2018). Bitcoin’s Growing Energy Problem. Joule, 2(5), 801-805.

Global Carbon Project. (2017). Global Carbon Atlas. Retrieved from http://www.globalcarbonatlas.org/en/CO2-emissions

Nakamoto, S. (2008). Bitcoin: A Peer-to-Peer Electronic Cash System. Retrieved from https://bitcoin.org/bitcoin.pdf

Stoll, Christian, Lena Klaaßen, and Ulrich Gallersdörfer (2018) “The Carbon Footprint of Bitcoin”, MIT CEEPR Working Paper 2018-018.

The Economist. (2018, 03.04.2018). Why are Venezuelans mining so much bitcoin? Retrieved from www.economist.com/the-economist-explains/2018/04/03/why-are-venezuelans-mining-so-much-bitcoin

UNFCCC. (2015). Paris Agreement. Retrieved from https://unfccc.int/process/the-paris-agreement/status-of-ratification

Yaga, D., Mell, P., Roby, N., & Scarfone, K. (2018). NISTIR 8202: Blockchain technology overview. Retrieved from National Institute of Standards and Technology, U.S. Department of Commerce.


Link to the full Working Paper: CEEPR WP 2018-018

About The Authors

Christian Stoll is a Ph.D. candidate at the TUM Center for Energy Markets of the Technical University of Munich. His research focuses on decarbonization from an economic point of view. Christian has been a CEEPR visiting student repeatedly in the past, and will continue joint research with CEEPR in the future. Contact: cstoll@mit.edu.

Lena Klaaßen is a graduate student at TUM School of Management at the Technical University of Munich. Lena’s research focuses on crptocurrencies and she has previously analyzed blockchain related firms for a venture capital fund.

Ulrich Gallersdörfer is a Ph.D. candidate at the Chair for Software Engineering for Business Information Systems in the Department of Informatics at the Technical University of Munich. He has a lecture on blockchain technology at TUM and in his research, Ulrich focuses on data analytics of public blockhains such as Bitcoin, Ethereum, and others.