BITCOIN

SBF's Carbon Emissions Math Class: How much carbon does Bitcoin really emit? Calculate and find out.

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Perhaps due to the criticism of Bitcoin's environmental impact, FTX founder SBF posted a mathematical article on Twitter, stating: "How much CO2 does Bitcoin actually produce? Should we be worried about it?" As of the deadline, this tweet from SBF has also received public support from the BitMEX exchange. [source]

How much does non-renewable energy account for in mining costs?

SBF states that assuming we spend X amount in transaction fees on Bitcoin or Ethereum, or other Proof of Work (PoW) cryptocurrencies. X goes through on-chain bidding and eventually ends up in the hands of miners. In an efficient market, as long as mining Bitcoin or Ethereum remains profitable, people will continue to participate.

So if people pay X amount, then the cost spent by miners should be less than X. Therefore, SBF assumes:

Gas Fee is approximately equal to Mining Cost * 3/2

SBF divides the Mining Cost into 1/2 for electricity and 1/2 for equipment, inferring that 3/4 of the mining cost will be spent on electricity. The derivation process is not clearly described.

He then mentions that 1/3 of mining facilities are operated by renewable energy, meaning that 2/3 of the electricity used will come from non-renewable sources. The electricity cost is about $0.05 per kilowatt-hour. Each kilowatt-hour kWh will generate 0.0004 tons of carbon dioxide.

How bad is the carbon dioxide?

SBF states that according to Cool Earth calculations, approximately $1 can reduce 1 ton of carbon emissions.

Conclusion: Balancing mining carbon emissions only requires a low cost

SBF concludes his calculation, Gas Fee spent X amount, with 2/3 going towards Mining Cost, 3/4 going towards electricity, of which 2/3 is from non-renewable energy sources, costing about $0.05/kWh, producing 0.0004 tons of carbon dioxide per kWh, and $1 is needed to reduce one ton of carbon emissions.

2/3 * 3/4 * 2/3 / 0.05 * 0.0004 * 1 = 0.0026

SBF states that this result tells us that if you spend $1 on transaction fees, you only need to donate $0.0026 to Cool Earth to solve the carbon emission problem. He also notes criticism towards Tesla's Elon Musk for the carbon footprint caused by Bitcoin.