A new study has slammed Bitcoin mining technology for its large environmental costs.

The cryptocurrency Bitcoin is known for its massive energy footprint, consuming more than 1,200 times more electricity for a transaction than the maximum footprint of a transaction processed by the banking industry.

Researcher Alex de Vries, a blockchain specialist at PricewaterhouseCoopers (PwC) and founder of Digiconomist (@DigiEconomist), has previously estimated that Bitcoin consumed as much electrical energy as all of Hungary in 2018.

Bitcoin proponents say that even though it is using a lot of energy, the mining facilities (most of which are based in China) use mostly excess renewable energy.

But Mr de Vries says there is a problem.

Once a Bitcoin machine is activated, it is not shut down until it fails to continue operating profitably. While this elevated electricity demand remains constant, the renewable energy used to fuel it fluctuates.

The Sichuan province of China, where most miners are now located, generates three times more hydroelectricity during the wet summer months than during the dry winter months.

Climate change is only expected to exacerbate this volatility, and coal-based energy is typically used to balance out these fluctuations.

Me de Vries says Bitcoin mining cannot be considered 'green’.

“This challenge of combining a constant energy requirement with variable renewable production will always exist,” he said.

“It might even provide an incentive for the construction of new coal-based power plants in order to meet the higher base demand.”

But Mr de Vries also notes that even if Bitcoin mining devices could run on renewable energy alone, they would still be discarded as electronic waste at the end of their lifespans.

The most popular machine on the market, an Application-Specific Integrated Circuit (ASIC) miner, cannot be repurposed because it is hardwired solely for mining Bitcoin.

This means it is likely to end up with other cast-off electronics in a landfill or incinerator, causing damage to the environment.

Even though Bitcoin still only constitutes a small portion of all currency transactions, Mr de Vries thinks there is already cause to be concerned.

“Its energy consumption and electronic waste generation are certainly not negligible at the moment, and they will likely escalate quickly to even more extreme amounts if Bitcoin manages to become widely used,” he says.

However, Mr de Vries believes these sustainability concerns can be averted by replacing the mechanism used to mine Bitcoin.

An alternative ‘proof-of-stake’ mechanism already used by the cryptocurrencies Dash and NXT (and soon to be used by Ethereum, which is transitioning away from a mining mechanism similar to Bitcoin's) does not depend on computing power to build the blockchain. This adjustment would cut Bitcoin's energy consumption by a striking 99.99 per cent and would eliminate the need for specialised, non-repurposable hardware.

“Ultimately, Bitcoin is just software,” says Mr de Vries.

“The mining mechanism can be replaced. The challenge is that the entire network needs to agree to this change.”

His full study is accessible here.