In the past three years bitcoinâ€™s market cap has grown to more than $1 trillion from $70 billion, and its â€œannual global energy consumption increased nearly four times, to over 200 terawatt hours (TWh),â€ according to a research report by Deutsche Bank on the crypto industryâ€™s sustainability issues.
While bitcoinâ€™s environmental impact was hardly mentioned at the recent COP26 climate conference, it remains a key issue for crypto users, the bank said.
â€œMining just one bitcoin consumes a larger carbon footprint than nearly 2 billion Visa transactionsâ€ and just one bitcoin transaction could power the average U.S. household for 61 days, analyst Marion Laboure wrote in the Dec. 9 note.
â€œCryptoâ€™s carbon footprint could hinder adoption,â€ the bank said, noting that as of July 64% of sovereign-wealth funds had a policy covering environmental, social and governance (ESG) issues.
Private sector companies have also pledged to become carbon neutral, Deutsche Bank observed. In the public sector, 197 have signed up to the Paris Agreement, which aims to limit rising global temperatures to 2Â°C by cutting greenhouse-gas emissions. The bank cites one study that predicts bitcoin mining alone could lead to an increase of that amount in just three decades.
Due to the carbon footprint of mining operations, some governments and regulators, such as the Chinese, are taking action, the report said. But as the market value of cryptocurrencies expands â€œpeople will find a way to mine, trade and use cryptocurrencies, especially in an unregulated market.â€
The bank sees a number of ways to approach the â€œdecarbonization of cryptocurrencies,â€ including a move to renewable energy sources; disincentivizing carbon-fueled mining; a switch to proof-of-stake protocols from proof-of-work; or by pre-mining tokens.
At the moment, 76% of bitcoinâ€™s global energy consumption comes from non-renewable sources like coal, the note said.
Read more: How the Bitcoin Industry Is Responding to Wall Streetâ€™s ESG Concerns