Bitcoin saw a new lease in life during the coronavirus epidemic, with its value rising to new heights as the world was brought to an impasse. However, its fortunes continue their wild swings.
The decentralised electronic money has come a long ways since its conception in 2008. It was created by idealistic early adopters who were angry at the recent financial crash. They saw it as a way of bypassing the crony capitalismist institutions that had pushed society into recession through greedy negligence.
Bitcoin was born out of the same anti-establishment spirit that inspired movements such as Anonymous, Occupy, WikiLeaks and the more recent GameStop War on Wall Street short-sellers. Bitcoin’s practical problems and inefficiencies gradually came to light. From its lack of consumer protection to facilitating criminal activities like black market trading and money laundering, and tax evasion.
Perhaps the most significant issue is the environmental impact of Bitcoin mining. This is the process that generates virtual coins.
Bitcoin is not regulated. However, it must verify all transactions between traders to ensure fair play. To do this, miners are responsible for updating the ledger. This idea was created by Satoshi Nakamoto, the mysterious architect of cryptocurrency.
This is what you would call adding a block to the Blockchain miners race to guess an random number. It is a chase that requires huge amounts of computer processing power as their machines try to solve complex, but arbitrary mathematical equations in order to be first and to be rewarded with a highly profitable coin.
The blockchain is getting longer and more complex, which means that the calculations are becoming more complicated. Supercomputers are required to perform the trial-and-error hunt to find the solution.
There are more than 150 quintillion attempts to guess the number every day around the globe, with sprawling hangars full of computers working 24 hours a day.
According to Alex de Vries, founder of Digiconomist, these cryptocurrency farms use a lot of electricity to run their businesses. A single Bitcoin transaction creates a carbon footprint that is 360kg. This compares to 500mg for an average Visa transaction.
They are often set up in areas where power is most affordable, such as northwestern China’s Xinjiang Province, home to the oppressed Uighur population. This province is where coal is plentiful and still accounts for two thirds of the country’s energy use.
Chinese Bitcoin mining is not only dependent upon finite fossil fuel sources, but their enormous electricity consumption results in carbon emissions that are accelerating so quickly, according to a new study. They are predicted to soon surpass the energy use of Italy and Saudi Arabia if they are not reined in.
Unchecked the annual power consumption of China’s Bitcoin industry is expected to reach 297 Terawatt-hours (Twh), surpassing Qatar and Czech Republic’s carbon emissons outputs by 2024.
For the entire planet, the computing power needed to support Bitcoins underlying networks now requires almost as much energy than the whole of Argentina.
Last month’s analysis by the University of Cambridge suggests that Bitcoin mining consumes more electricity than 121Twh annually. If it were a country, it would be among the top 30 electricity users worldwide.
The power demand from crypto farms located in Abkhazia (northwest Georgia) has been so great in recent years that rolling blackouts were the norm. Equipment had to be confiscated.
Another environmental impact of Bitcoin mining is the fact that it still relies on short-lived hardware for its calculations. This inevitably burns out and must be replaced. This has led to a spike in demand microprocessing chips.
The only companies that can mass-produce the chips Bitcoin mining device manufacturers like Bitmain require are Semiconductor manufacturers Samsung, Taiwan Semiconductor Manufacturing Company, and De Vries says these companies face significant challenges due to the global shortage of semiconductors and price inflation.
This shortage has a knock-on effect on the production of other consumer electronics, such as smartphones and games consoles to electric vehicles.
Crypto farms have been established in countries like Norway and Iceland, which are largely powered by renewable energy sources. This climate is ideal to keep servers cool. Inner Mongolia has made a bold move to ban this practice for the good of the natural environment.
This blockchain claims to be 4mx more efficient than Bitcoin due to its Proof-of-Stake technology. It validates transactions based upon how many coins a participant has, and not on their computational processing power.
While it remains to see if Cardano and other challengers like Ethereum will be able to topple Bitcoin from its perch, it is clear the current rate at which energy is being used is not sustainable if global warming is to be curtailed.
The current infrastructure supporting the Bitcoin protocol cannot be sustained. However, the beauty of the protocol’s incentive structure will force miners adopt the cheapest form, which in the near-term will be renewable energy. Don Wyper, COO at DigitalMint, recently stated. The Independent.
