Bitcoin Has a Dirty, Dirty Secret

Bitcoin has a dirty secret.

The cryptocurrency has wowed markets this year with breakneck gains as investors flocked to an asset that exists only in cyberspace. But the laborious creation of each digital bitcoin by private computer networks has real-world consequences in the form of massive energy use—including from fuels that cause the most pollution.

Eight 100-meter-long metal warehouses in northern China are a case in point. Bitmain Technologies runs a server farm in Erdors, Inner Mongolia, with about 25,000 computers dedicated to solving the encrypted calculations that generate each bitcoin. The entire operation runs on electricity produced with coal, as do a growing number of cryptocurrency “mines” popping up in China.

The global industry’s power use already may equal 3 million U.S. homes, topping the individual consumption of 159 countries, according to the Digiconomist Bitcoin Energy Consumption Index. As more bitcoin is created, the difficulty rate of token-generating calculations increases, as does the need for electricity.