With the latest Bitcoin halving set for tonight, the network underlying the world’s largest cryptocurrency is set to undergo its biggest change in years.
Much has been prognosticated about how the shift will impact BTC’s price and the broader crypto market. But how will the halving impact Bitcoin’s controversial, oft-debated, and undeniably massive impact on the environment?
The answer, it turns out, is complicated.
By reducing BTC mining rewards by 50%, Bitcoin’s latest halving will once again move the goalposts on who can afford to direct immense amounts of electricity at creating new BTC, and who can’t. Once upon a time, Bitcoin miners could earn 50 BTC per block. At the moment, they earn 6.25 BTC. In a matter of hours, that sum will drop to 3.125 BTC.
As BTC mining rewards drop lower and lower, independent miners are poised to get squeezed out of business—leaving giant, institutional players that have invested untold millions of dollars in cutting-edge technology designed to maximize the efficiency of mining operations.
“Miners will be forced to become more efficient in order to remain profitable,” Kyle Schneps, VP of public policy at crypto mining and staking firm Foundry, told Decrypt. “This means not only more efficient machines, but also the most affordable energy, which tends to be renewable energy in remote locations.”
Large firms are far better poised than independent miners to make the leap to both energy efficient machines and hard-to-reach renewable energy sources. The halving will push such firms even further into dominance—and thus make BTC mining overwhelmingly the product of highly efficient, and often renewable sources of energy.
Isaac Holyoak, chief communications officer at $3.6 billion Bitcoin mining juggernaut CleanSpark, says the company anticipates that Bitcoin’s global hash rate will fall by as much as 15% following the halving.
Bitcoin’s hash rate is a measurement of the amount of computing power being used on the network at a given time; the figure increases the more miners are competing to seize precious BTC rewards. A 15% drop in that rate would constitute a significant decrease in energy usage, says Holyoak.
“What’s important about that, is that this [disappearing] 15% percent is disproportionately a greater consumer of energy than the remaining 85%,” he told Decrypt. “Those machines that still run will continue to monetize stranded energy and balance the grid and they will do so in a more efficient manner.”
Thus, at least in the short term, the halving may spell good news for those concerned about the sustainability of Bitcoin mining’s environmental impact. But other industry experts say that improvement may be short-lived.
“The upcoming halving event will transform the Bitcoin mining process, notorious for its inherent inefficiency, into a more energy-efficient operation than ever before,” Nishant Sharma, the founder of Bitcoin mining research firm BlocksBridge, told Decrypt. “Will this lead to a reduction in energy consumption? Perhaps temporarily.”
Over time, Sharma said—as Bitcoin becomes increasingly mainstream and more widely used for a variety of purposes—transactions on the network will surge, proportionally increasing the amount of computational power required to run the network. It won’t take too long for those increases to outweigh the decreases brought about by this week’s halving, he said.
So, the halving may very well spell good news for Bitcoin’s immediate environmental prospects.
But that’s a very different thing from saying the event will bring about the end—or even the beginning of the end—of heated debates over the crypto network’s still-colossal energy consumption. That doesn't appear to be going away anytime soon: Earlier this week, Norway introduced a law that would effectively give the nation’s government the power to shut down crypto mining operations deemed environmentally harmful.
Edited by Andrew Hayward