The Cost & Sustainability of Bitcoin — Part IX — Gold vs. Bitcoin
Why Gold?
Gold has been used for millennia as a means to project and protect wealth. In terms of projection of wealth, as can be seen from the data below, 52% of all gold ever mined is used for jewellery and palatial adornments. In terms of protection of wealth, central banks hold 18% of the world’s gold supply and other investors hold 16%[1]. It also has practical applications, with 10% of yearly demand coming from industry[2], with almost 12% of the world’s supply of gold held inside technological products.
I’ll quickly go through my findings from 2014 before we get into updates based on the latest data, and additional new findings. I’ve linked the previous report in the description below for deeper reading and sources.
Blast from the Past
Since the previous iteration of this research in 2014 (using 2013 data), World Gold production has increased 18% from 2770 tonnes, to 3270 tonnes in 2017[3]. We have also witnessed a sharp drop in the amount of recycled gold produced, going from 37% of total annual production in 2011 down to only 26% at 1160 tonnes in 2017.
The Mining Lifecycle
The mining of gold is quite an involved process, and the 8 lifecycle stages of a mine typically occur over a long time (many times upwards of 20 years). The costliest stages are the fourth, fifth and sixth stages — construction, production and rehabilitation.
Mine construction provides the necessary infrastructure to allow for a productive mine, Rehabilitation involves returning the land to as close to its pre-mining condition as possible. Although these activities have huge costs and impacts associated with them, they pale in comparison to mining production.
Here you can see a low-res image of the typical gold production process. I’ll aim to clear it up with some words.
Ore is mined, taken to the plant for multiple runs through the crusher, gets treated with a whole bunch of cyanide and obscene amounts of fresh water, and mountains of waste rock generated. Literally mountains. For the 3270 tonnes of mined gold produced last year, about 5 billion tonnes of waste rock were generated, or around 2.5 billion cubic meters. This would produce a cone-shaped mountain with a base diameter of a kilometer, and taller than the peak of Mt Everest. All this for a 6-meter cubed box of gold! Add to this almost a TRILLION litres of water and 500,000 tonnes of Cyanide, and you’ve got a legitimate disaster on your hands. And this is before we get into conflict gold, worker deaths, billion-litre cyanide leaks, emissions and other environmental impact factors.
Recycled gold has a substantially lower impact than mined gold, and we’ll run the numbers on both. See the previously mentioned 2014 research for the real nitty gritty.
Mined vs. Recycled — Total Emissions
In a very comprehensive study produced by Dell in November 2017[4] showed some fascinating information on the relative sustainability of gold mining, and gold recycling. Results are shown below. It should be noted that Dell’s 15 tonne CO2/kg figures for gold mining exclude the construction and demobilisation of mine infrastructure, and site remediation. When including those, the original figure of 20 tonne CO2/kg[5] that we used in 2014 was a very fair estimate. Perhaps the best observation to draw from the Dell data is just how toxic and harmful gold mining is to the planet, even though it produces less than half the amount of CO2 per kilo of recycled gold. Before we get into the numbers, remember that the average global emissions per kWh are 600g of CO2 and CO2 equivalents.
Now that our original 2014 assumptions for gold mining have been validated against an in-depth recent study by Dell, we can take a look at how the numbers stacked up in 2017.
Gold Mining Equipment
The next item to assess is the impact of producing mining equipment. To do this, we can look to the world’s largest Gold mining company, Barrick Gold, and the fleet and staff data they provide for their Pueblo Viejo[6], Veladero (open-pit)[7], and Barrick Nevada (Cortez[8], and Goldstrike[9] mine operations), which produce 107 tonnes of Gold per year[10], or, about 3.3% of total supply.
Having precise data on the machinery required to produce 3.3% of the world’s Gold, we will extrapolate the total weights found above (66128 + 2784 = 68,912 tonnes) out to the other 96.7% of the market. This results in almost 2.1 million tonnes of mining equipment. Despite this seemingly huge amount of equipment, surprisingly few emissions come about from manufacturing equipment, with only about half a million tonnes of CO2 per year emitted from the manufacturing, packaging and shipping of machinery. Quite surprisingly, manufacturing ASICs for the Bitcoin network each year produces dramatically more emissions, in fact, it produces about 60 times as much, coming it at 36 million tonnes per year. Bear in mind that Gold Mining is just a small part of the wider mining industry however.
Mined Gold vs Recycled Gold — Other Impacts
As can be seen below, Bitcoin is dramatically less harmful than Gold on all indicators aside from Carcinogenics, where the Global Electric Grid, i.e., the sole unified entity powering the Bitcoin network, spews more than double that of the Gold industry. As the electric grid moves towards renewable energy sources, Bitcoin’s figures will continue to improve quite dramatically, however there will be little improvement in the gold mining industry, as you can’t exactly get your hands on any gold unless you unearth a literal mountain of ore and use up a trillion liters of scarce fresh water.
Gold vs. Bitcoin — Summary
From our study, it is clear that Bitcoin uses a substantial amount of energy — now closing in on the entire Gold industry, and due to its reliance on the electrical grid, CO2 emissions are high. As the electric grid moves towards renewable energy sources, Bitcoin’s figures for CO2 emissions will continue to improve, however there will be little improvement in the gold mining industry. That said, Bitcoin’s energy use will continue to grow in line with the Network’s computing power growth, and will most likely eclipse the Gold Industry within this decade.
Another interesting statistic is that more energy goes into building Bitcoin hardware than goes to producing the world’s gold mining equipment. But since a large part of ASIC manufacture is tied to the electrical grid, Bitcoin’s emissions proportional to its energy use will reduce
References
[1] Hewitt, M., 2008 “Global Money Supply — 2008” http://www.gold-eagle.com/article/global-money-supply-2008-update [Accessed 9 April 2014]
[2] World Gold Council, 2012. The strategic case for gold as an asset class, s.l.: World Gold Council.
[3] World Gold Council, 2013–2018, “Gold Demand Trends”, http://archive.li/ioBTj
[4] Dell, 2017 “Environmental Net Benefit of Gold Recycling” http://archive.is/UgzhS
[5] McCook, H. 2015, “An Order-of-Magnitude Estimate of the Relative Sustainability of the Bitcoin Network” https://www.academia.edu/7666373/An_Order-of-Magnitude_Estimate_of_the_Relative_Sustainability_of_the_Bitcoin_Network_-_3rd_Edition
[6] Barrick Gold Corporation, 2018 “Technical Report on the Pueblo Viejo Mine, Sanchez Ramirez Province, Dominican Republic”, pp 16–18 (Table 16–9)
[7] Barrick Gold Corporation, 2018 “Technical Report on the Veladero Mine, San Juan Province, Argentina”, pp 16–23 (Table 16–11)
[8] Barrick Gold Corporation, 2016 “Technical Report on the Cortez Joint Venture Operations, Lander and Eureka Counties, State of Nevada, U.S.A”, pp 16–14 (Table 16–6)
[9] Barrick Gold Corporation, 2017 “Technical Report on the Goldstrike Mine, Eureka and Elko Counties, State of Nevada, U.S.A”, pp 16–5 (Table 16–2), pp 16–13 (Table 16–8)
[10] Barrick Gold Corporation, 2018, “Annual Report — 2017”, https://barrick.q4cdn.com/808035602/files/annual-report/Barrick-Annual-Report-2017.pdf (accessed 16 June 2016)
