Bitcoin has grown from a fringe technology that was popular among cryptographers to become the ninth most valuable asset in the world by market capital in just a decade.
The cryptocurrency’s rapid rise has made millions, reimagined the concept of money and launched a multibillion-dollar industry that is based on its revolutionary decentralised tech. However, it has also had some unwelcome side effects.
It takes nearly as much energy to support Bitcoin’s underlying network than Argentina, which has led to criticisms about its environmental impact.
Analysis by the University of CambridgeThe Bitcoin network consumes more that 121 terawatthours (TWh), which would make it one of the top 30 electricity consumers worldwide.
The rising price of Bitcoin, which has risen to over $42,000 in the last month, has fuelled energy needs.
Concerns about Bitcoin’s energy needs have been there since the beginning. Hal Finney, a crypto pioneer, tweeted about future CO2 emissions just two weeks after receiving his first Bitcoin transaction from Satoshi Nakamoto (the cryptocurrency’s pseudonymous creator).
The amount of energy Bitcoin’s network uses has not been a prominent issue until 2017, when a major rally dramatically pushed its energy needs up to the level a small country. The energy requirements increased as the market declined over the years. But the current all-time high of this week is nearly twice that of three years ago. Even more energy is required this time around.
Bitcoin’s energy consumption has quadrupled in the past year since the peak in 2017. It is expected to get worse as energy inefficiency is built into Bitcoin, Charles Hoskinson, CEO at IOHK, tells. The Independent.
The carbon footprint of Bitcoin will increase exponentially as it becomes more competitive.
Bitcoin’s environmental impact can be exacerbated by its majority-based location in China. Over two-thirds (or more) of the power generated by coal.
To generate new cryptocurrency units, the mining process involves solving complex, but arbitrary mathematical equations. This requires a lot of computer processing power.
Bitcoin miners gravitate to places where electricity costs are the lowest, meaning that the main problem is not Bitcoin itself but a lack in cheap renewable energy production.
There are solutions, and some eco-friendly mining facilities are already in operation on a large scale.
The majority of energy production in Norway and Iceland is renewable, so cryptocurrency miners are able to take advantage of low-cost hydro-electric and geothermal energy to power their machines. The low temperatures in these countries help to lower costs by cooling the server computers naturally.
The University of Cambridge hosted its third annual “Second Year” event last year. Global Cryptoasset Benchmarking StudyThe study found that 76% cryptocurrency miners used electricity from renewable sources for their operations. This was an increase of 60% from the 2018 benchmarking study.
According to projections of the International Renewable Energy Agency (IREA), this trend is expected continue. Report last yearRenewable energy sources are becoming more cost-efficient than fossil fuels.
The infrastructure that supports Bitcoin protocol cannot sustain its current status. But the beauty of this protocol is that miners will be forced to use the cheapest form electricity. In the near future, renewable energy will be available, Don Wyper (COO of DigitalMint) tells. The Independent.
I think the latest University of Cambridge study is misguided, as Bitcoin is acting as a digital gold and therefore should be compared to the energy consumption of other store-of-value-assets… The gold mining industry uses 475 million GigaJoules of electricity each year.
If Bitcoin is to become the digital currency that it was originally envisioned, we need to take into account all the electricity used for currency creation, destruction and transmittance. Climate change is a major issue in the world today. However, people who claim that Bitcoin will cause more environmental destruction don’t understand that Bitcoin acts as an accelerant to help our environment.
Bitmain’s mining facility near Keflavik in Iceland features Bitcoin mining computers
(Reuters)
Alternative cryptocurrencies also seek to solve Bitcoin’s current environmental problems by changing its underpinning technology so that it consumes less power.
Cardano is one of them. Hoskinson claims that Cardano is 4 million times more efficient than Bitcoin due to its Proof-of-Stake Blockchain. This blockchain validates transactions based upon how many coins are held and not the computational processing power of the participant.
Cardano is being built to scale in order to meet the demands of global consumers and businesses at higher volumes than existing global financial networks. However, the entire global network consumes no more energy that a large family home, Mr Hoskinson said.
If Bitcoin’s transition to renewable energy sources does not happen quickly, Mr Hoskinson is among several experts who predict that investors and consumers will look to other cryptocurrencies that are less environmentally-damaging.
Scott Morgan, Blockchain consultant and Blockchain consultant, tells us that I believe that fear over climate changes is far more powerful than fear of missing out (FOMO). He says this to explain why this new wave in institutional and retail Bitcoin investment is being driven by fear. The Independent
Bitcoin can do amazing things in the world. It is a technology asset. [But]Other cryptocurrencies consume less energy.
