Alex de Vries has been criticized for saying that Bitcoin is bad for the environment. A Google search shows a lot of pushback against Alex de Vries’ research. People are unhappy. The crypto bros have dedicated their entire lives to this endeavor. subreddits to discrediting the economist’s reporting as propaganda linked to his job at the Dutch central bank. Speakers at cryptocurrency events name-check him during their conversations. Blockchain boffins disagree with his conclusions in articles and columns.
“Let’s just say I have plenty of fans in the bitcoin space,” de Vries shrugs when VerdictThe critique is brought up. “Over the years, I [have] learned not to pay too much attention to it.”
Despite the predominantly online abuse, he’s not shutting up. He is still publishing new insights on his website. Digiconomist, but he’s also picking up the phone whenever journalists call. His phone rang hot with reporters who wanted to know more about his research, in the lead up to Earth Day on 22/04. They’re asking him for good reason: he is one of the world’s foremost authorities on the environmental impact of cryptocurrencies.
“I guess my research kind of put this topic on the map because I started doing it six years ago when nobody was talking about it,” de Vries says.
However, it was someone else’s writing that put him on the path. He recalls reading a story. MotherboardHe was shaken to the core by 2015 “[It] suggested that a single bitcoin transaction on average consumed as much electricity as a US household in one and a half day at the time,” de Vries says. “That’s a lot of energy for something that is ultimately as simple as me sending your money that should not be the case.”
He decided to investigate. The resultant research paints a grim picture of the environmental impact of bitcoin. According to de Vries’ research, the digital dosh has a carbon footprint the size of the Czech Republic, consumes as much electrical energy as Thailand and produces 32,27 kilotons of electronic waste per year, which is roughly the same amount generated by small IT equipment waste in The Netherlands. He believes bitcoin’s burgeoning popularity is only going to make it worse.
“It was one US household’s worth of power for one and a half days [per bitcoin transaction] back in 2016,” de Vries claims. “Now you’re talking two and a half months [for the]Same metric [and that is]This is the average energy consumption. That’s because the energy use keeps growing [as the]Price keeps increasing. But there’s no extra transactions taking place.” In other words: when the price of bitcoin skyrocket, its impact on the environment balloon too.
Bitcoin boom and bust
During the pandemic, cryptocurrency investments saw a surge in interest. Researchers have suggested a few factors that may have caused the bitcoin stampede. Some suggested that people viewed it as a digital form of digital. goldThe, which is a safe asset to inject cash into in times of uncertainty. Bitcoin’s Reputation is a safe haven assetThis year, the price fell despite the fact that the company had announced a new product. war in Ukraine.
Others have suggested that the rise in bitcoin investment could be due to lockdown boredom. This is because people are betting on it as an alternative to apathy. Whatever the reason, the digital dosh’s value soared to new heights during the Covid-19 crisis. This culminated in a $68,000 all-time highIn November 2021.
Venture capital investors have noticed. Despite the fact that interest in cryptocurrency startups seemed to have dropped following 2018, the record-breaking year, VCs were back in force in 2021. According to research firm VC Deals data, they poured over $26.2bn into projects involving blockchain money in 2021. GlobalData. 2022 is also expected be a corker. The sector has already seen $9.58bn infusions.
In the last few years, both investor interest in cryptocurrency projects has exploded and so has the price of bitcoin. De Vries estimates that the price of bitcoin has skyrocketed in tandem with the increase in electricity usage.
The bitcoin price has fallen since November’s peak and is currently trading at just over $43,300. Some market watchers may feel reassured by this, believing that bitcoin can be used to make money. Winter cryptocurrencyIt doesn’t tell you what the next bitcoin speculation will bring, but it does explain that this is happening. It also doesn’t explain how bitcoin is supposedly using all of its electricity.
Let’s get into it, shall we?
How does bitcoin use electricity?
Bitcoin uses a lot if electricity. When a new block is added to the bitcoin blockchain, most of that electricity is burned. Each block contains a record of all transactions that were made on the bitcoin blockchain. Mining is the process of creating these blocks. Every 10 minutes, a new block is created. This happens when computers work together to solve complex problems. These computer collections are known as nodes, or miners.
These puzzles are solved by miners who compete for the prize. The puzzle’s solver then presents proof-of-work to the rest of their network, proving that they have made computational efforts. Once enough nodes verify the work, a new blockchain is created. As a reward, the solver of the puzzle is awarded a certain amount of bitcoin. The process starts over again. This is how bitcoin miners earn their money.
This is the core of bitcoin’s decentralised nature. The creation and operation of the network are not in the hands of anyone. Instead, it operates on a consensus model in which each node is accepted and approved by the majority of miners. It is possible to argue that it is what keeps the blockchain safe from hackers. It is also where the bitcoin network consumes most of its electricity.
“Determining energy usage for crypto mining is simple: You look at the hashrate (the combined computational power used to mine Bitcoin and process transactions) and then estimate the energy needs of the hardware used,” Nicklas Nilsson at GlobalData tells. Verdict.
This is what de Vries did as part of his research. He calculates the annual electricity use at 204.50 Terrawatt-hours (TWh). Eggheads behind University of Cambridge’s Cambridge Bitcoin Electricity Consumption Indicator(CCAF) put bitcoin’s annual electricity consumption at a more conservative 139.59 MWh.
These figures have reinforced the belief that bitcoin is bad news for the environment. Tesla, an electric car manufacturer, stopped people from purchasing cars with crypto last year because of concerns about its sustainability. If they ever didTo clean up its green chops.
How bad does bitcoin really make the environment?
It should be easy, right? Case closed: Bitcoin is bad for the environment. Not quite. Not quite. VerdictAs has been pointed out in the past it is not easy to get a clear picture of how bad cryptocurrencies’ sustainability skills are. Although most researchers agree that bitcoin consumes a lot of electricity, estimates about the impact on the environment differ. Why? Because it can be very difficult to do right.
Nilsson states that it is difficult to estimate carbon emissions because you need to know exactly what energy mix is used. This is why the environmental damage can vary greatly depending on where it comes from. “Renewable energy is usually stated at between 30% and 75%. It can vary greatly.”
There are several reasons why this is so. The CCAF warns us that the data we have is not always reliable and can be inconsistent. Accordingly, estimates can vary significantly depending on the methodology used by each researcher. Researchers at Cambridge warn against presenter bias. This means that researchers may not see all the information they need.
“For example, comparing bitcoins electricity expenses with the yearly footprints entire countries with million of inhabitants gives rise concern about bitcoins energy shortage spiraling out of control,” said the CCAF researchers. Write. “On the contrary, these concerns might be reduced, at least in part, when it is discovered that certain metropolitan areas or cities in developed countries operate at similar levels.
Researchers also found that the energy consumption is not that high, especially when compared to regular appliances. According to the CCAF, Bitcoin uses less electricity that all US TVs (104TWh) combined.
Nilsson says that there are other factors that can make these estimates more uncertain. He says that while most energy consumption occurs close to the source, crypto mining is not subject to this constraint. It can be mined anywhere, such as in areas where large amounts of hydro power have been lost due to oversupply.
De Vries argues that the amount of renewable electricity used by the network has decreased from 41.6% and 25.1% in the past year. He explains that this is due to Beijing banning bitcoin miningIn 2021.
“[Before the ban]De Vries states that these miners moved their equipment around throughout the year. “In the summertime they were actually located in south China, using hydropower during the rainy seasons. Then they would move to northern China to use the coal-based power during winter dry season.
He claims that the ban stopped him from doing so. Some miners fled to the US, where electricity grids are largely dependent on fossil fuel.
“Miners located in Texas and Kentucky do not move around,” [they are] just gonna stay put,” de Vries says. “But there’s just no renewable energy on those grids,” de Vries says.
Can bitcoin make electricity more green?
CoinDeskNic Carter, columnist for Texas Monthly, has argued against this view. In a recent opinion piece, he suggested that miners are increasingly using “behind-the-meter” mining to produce their products. He stated that bitcoin miners only rely on the fossil-heavy grid when there is abundant wind and solar energy.
The American Clean Power AssociationIn February 2022, it was reported that Texas has also installed 7,352 megawatts in wind, solar, and energy projects for 2021. It is the most installed state in the country. But, 90% of its energy comes mainly from fossil fuels. Take that as you will.
Oleg Fomenko (co-founder of Sweatcoin), a cryptocurrency company that compensates customers who walk instead of using public transport, says, “The problem with energy usage is not just energy consumption. Verdict.
Bitcoin is not only a great energy user, but it also produces tons of electronic waste. With bitcoin’s popularity, miners will need to update their hardware. That usually means throwing out the old processors. De Vries estimates the amount of electronic waste generated by every bitcoin transaction equals to throwing away two iPhones. He estimates that each piece of equipment has an approximate lifecycle of one and a quarter years.
Industry stakeholders are well aware of this. They are now more open to the idea of “lifecycle mines.” The idea is that miners should connect older hardware to renewable energy sources and keep new purchases on the grid. Renewable energy is less stable and less reliable. But miners could save more money by connecting their old machines to renewable power sources when the right conditions exist. We are unable to determine how common lifecycle mining is. Others suggest that bitcoin could accelerate the adoption of greener energy.
I’m not convinced that bitcoin is bad for our environment. It is flawed and short-sighted, Nigel Green of deVere Group, financial advisors, says. Verdict. “Bitcoin Mining could accelerate the transition to renewables from fossil fuels. Although clean energy is the best option, their sources can be irregular and there is not enough storage to store excess energy.
“Bitcoin miners, which require huge amounts of energy, could be major buyers of last resort, providing significant profit for investment and expansion. This would increase the supply of renewable energy, which would in turn lower prices for consumers and drive demand.
Is it really that bad that bitcoin uses so much energy?
No matter how many estimates are made, it is clear that bitcoin consumes a lot of electricity. But not everyone believes that this is a problem.
“Everything we do digitally requires energy. Erica Stanford, author titled “Bitcoin’s Carbon Footprint: There is a lot of blame.” Crypto Wars: Faked deaths, missing billions and industry disruptionTells Verdict.
She suggested that bitcoin uses a lot more electricity than regular fiat money systems. She says that one of the “benefits of” bitcoin is its ability to use a lot of electricity. [bitcoin using a lot of energy is that it]It is extremely secure. The crypto expert has a point. It is extremely difficult to abuse the bitcoin blockchain due to its decentralised nature.
Stanford states that the bitcoin lockchain is considered the most secure way to store money. It has never been hacked. It’s considered infinitely safer than money stored in banks or any other financial institution. The fact that it uses so many energy does increase its safety.
The CEO of the deVere Group takes a more aggressive tone and suggests that those who are blaming bitcoin for its negative impact on the environment are the same people that have been cynical for a long period.
Green claims that the bitcoin bashing is on the wrong side. “People have been attacking Bitcoin for 13 years and they’ve been proven wrong many times over. In a big way.
Some critics have already changed the mind. Warren Buffet, an investment tychoon, once offered bitcoin to rat poison. But Berkshire Hathaway invested. $1bn into a crypto-friendly neobank Nubankearlier this year. Nubank offers the same savings and banking services as other digital lenders. Cryptocurrencies are just a small part of its bottom line.
Similarly, JP Morgans CEOJamie Dimon is not a fan of bitcoin. He has compared bitcoin to smoking and scams in the past. Frauds like BitConnectOneCoin and OneCoin did not do much to dissuade him. Neither has the fact that ransomware groups using bitcoin to get their money. Similar statements have been made by Goldman Sachs, an investment banking bank.
Green said that “now it has a significant crypto trading department.” “I believe Alex de Vries, along with other crypto cynics will one day have a similar u/turn on his stance.” Major corporations like Apple, Microsoft, Tesla, and PayPal have embraced cryptocurrencies.
Could new cryptocurrency projects be the answer?
The acceptance of cryptocurrencies is increasing among financial market players. Regulators are also suggesting that cryptocurrencies be considered an asset class. It shouldn’t be prohibitedIt should, however.You will face tougher police work. But that doesn’t mean bitcoin will be the digital dosh most people use in the future.
Stanford declares that Bitcoin is the first cryptocurrency. “I would like to see it as the tube in London. It’s the oldest, and was built long ago, when there weren’t many people using it. It’s safe, but slow and expensive, and it loses money often. The trains to Hong Kong and Singapore are fast, efficient, and cost-effective.
There have been many people claiming to be the same over the years. There have been many new digital currencies launched since Satoshi Nakamoto’s whitepaper, which would launch the crypto revolution in 2008. Some memecoins were created as jokes, often referencing Elon Musk. Examples include Elon Sperm Of Floki (named after Space X founder) and others.
Others, such the world’s second largest cryptocurrency, Ethereum are more serious. There are also countries all over the globe that are interested in launching. central bank digital currenciesThese include the UK, Sweden, and China.
Many of them also try to do this without wreaking havoc on the world. Ehereum, for example, still runs its transactions using a powerful proof-of-work blockchain such as bitcoin. It has also started to run in the q chain, which runs on proof of-stake. Instead of solving puzzles miners offer collateral to validate blocks. The validators then get selected randomly. This method of verifying new blocks uses less computational work and requires less electricity. The NEAR Foundation’s blockchain shows an example of a chain that is entirely based on proof-of-stake validations.
Marieke Flament, CEO at the NEAR Foundation, says that “the industry as a whole recognizes the importance of protecting our environment and that climate changes are a global crisis which increasingly demands our attention.” Verdict.
Sweatcoin is a cryptocurrency that runs on the NEAR Foundation’s Blockchain. It aims to encourage greener habits and mints its own SWEAT token based on how many steps its 63,000,000 users take. Each 1,000 steps earns the user another SWEAT coin. CEO Fomenko: Verdict The goal is “make physical activity part the global GDP.”
Projects like Cowa, which claims it is a zero-carb mining blockchain, are another option to reduce the industry’s carbon emissions. NuPay Technologies, a startup, has also created the Helo blockchain. It claims it is “the most environmentally-friendly blockchain in the world.” These efforts, however, are not altruistic. They aim to make digital money more accessible to everyday citizens.
“If we want a future where blockchain is used, cryptocurrency and NFTsAre widely used, we need to improve, greener, more intelligent, and more efficient than the previous technologies,” Brad Wilson is CEO and founder at NuPay Technologies. Verdict.
Bitcoin clearly has had an impact on tech enthusiasts, the environment, as well as the next generation of blockchain entrepreneurs. It will take time to see if this will be enough to erase the bad image of the industry in terms of sustainability.
GlobalData is the parent company for Verdict and its sister publications.
