Why is it so hard to fix environmental problems with bitcoins

1. How much power are you putting at stake?

According to the Cambridge Centre for Alternative Finance (which keeps a running estimate), Bitcoin’s power consumption increased from 6.6 Terawatt-hours per year at the beginning of 2017 to 138 Terawatt-hours by the middle of 2022. That is more than Norway. Digiconomist places annualized carbon dioxide emissions from Bitcoin mining at 114 millions tons, which is comparable to Belgium’s.

2. Why does it take so much energy to do this?

The largest miners operate with thousands of computers working in warehouses that look like data centers. The calculations they perform are used for verifying transactions within the network. Once completed, they unlock new Bitcoin. As the number of miners increases, the complexity of the calculations increases. In order to maintain a competitive edge, miners had to invest in more powerful machines and larger server farms in early 2022. Bitcoin advocates claim that cryptocurrency still uses a small percentage of global electricity consumption, less than the amount required to power the world’s Christmas lights.

3. Are miners trying lower their carbon footprints?

Yes. Yes. Others have added solar panels to their server halls or made deals for low-carbon, nuclear power. Many have opened businesses in upstate New York, Canada and Iceland, where there is abundant, emission-free hydro and wind power. It is motivated by self-interest and concern for the climate. Renewable power tends to cost less than other sources.

4. So, are Bitcoins emissions decreasing?

It is difficult to say. The June 2021 China ban deprived Bitcoin miners of their clean, abundant hydropower. This sent them off to find any reliable, affordable energy. Some established themselves near renewable energy sources in the U.S., while others moved to Kazakhstan, where fossil fuels still dominate. It is not clear how all this will impact Bitcoins carbon emissions as no one knows where all miners are located or what power they use. Joule published a study that found that Bitcoins environmental impact had worsened following China’s move in February. It showed that the percentage of renewables used for powering the network has fallen from more than 40% in 2020 down to about 25% by August 2021. Don’t forget about the environmental impact of miners disposing of old computer gear as they seek to maintain a competitive edge in processing power.

5. What are the government’s plans?

Bitcoin miners can still be found in some areas of the world that have surpluses of renewable energy. Texas, for instance, is trying attract more of them to be a source of demand to match its variable wind output. In other countries, they are considered a threat. The Chinese ban was in response to a power crisis that forced the country to reduce its electricity supply and decrease industrial output. After suffering from energy shortages, Kazakhstan, a major Bitcoin producer has imposed limits. The Swedish financial regulator has called for an EU-wide ban on crypto mining. It claims it threatens the urgent climate transition. Some governments prefer to channel renewable energy to older industries trying to decarbonize such as transport and manufacturing. Others complain that Bitcoin miners take up limited energy resources and provide little tax revenue and jobs to the host country.

6. Are crypto markets affected by the concern?

Yes. Tesla Inc. announced in February 2021 that it had invested $1.5 million in Bitcoin and would accept the cryptocurrency as payment. This double move was a catalyst to a rally in digital currency. Musk announced in May of that year a remarkable turnaround, suspending the token’s acceptance due to environmental concerns. The decision led to a sell-off for Bitcoin, which then spread to many other digital currencies.

7. What does this mean for Bitcoins future prospects?

Bitcoins opponents claim that the energy-intensive proof -of-work system used for verifying transactions on its digital ledger, or Blockchain, was never intended to underpin what is now a billion-dollar asset. Backers of other cryptocurrencies have used Bitcoin’s environmental impact to support their argument for switching to lower-power options. Cardano and Solana use different proof-ofstake processes, which consume less electricity. In mid-2022, Ethereum, the Bitcoin rival, will switch from proof-of work to proof-of stake. This could reduce its energy consumption by up to 99%. Bitcoin is still the most popular cryptocurrency in the world, but its energy challenge is growing. A rising Bitcoin price lowers miners’ break-even point, which gives them incentive to continue using older, less efficient machines.