Bitcoin is red hot. Can it ever be green?

1. How much power is involved?

Bitcoin’s estimated electricity consumption rose from an annual rate of 6.6 terawatt hours in early 2017 to 138 terawatt hours in early 2022 – more than a country like Norway – according to the Cambridge Center for Alternative Finance, which maintains an ongoing estimate. As for its carbon footprint, Digiconomist puts annual emissions from bitcoin mining at 114 million tons of carbon dioxide, comparable to Belgium.

2. Why does it take so much energy?

The largest miners have operations with tens of thousands of computers buzzing in warehouses that resemble data centers. The calculations they perform are used to verify transactions within the network, and completing them unlocks new bitcoins. The complexity of the calculations increases with the number of miners. The amount of computing power required hit a record in early 2022, forcing miners to invest in even more powerful machines and larger server farms to maintain a competitive edge. Bitcoin proponents say the cryptocurrency still consumes a tiny fraction of global electricity consumption — less than what’s needed to power the world’s Christmas lights.

3. Are miners trying to reduce their carbon footprint?

Yes. Some use excess natural gas that would otherwise be “flared” or burned just for disposal to generate electricity for mining. Others have installed solar panels on their server hangars or made deals to source low-carbon nuclear power. Many have established themselves in places like upstate New York, Canada, Iceland and Norway, where there is an abundance of zero-emission hydro or wind power. This is motivated both by self-interest and concern for the climate – renewable electricity tends to be cheaper than other sources anyway.

4. So, are bitcoin emissions falling?

It’s difficult to say. China’s ban in June 2021 deprived bitcoin miners of the country’s clean, abundant hydroelectric power and sent them in search of any cheap, reliable energy they could find. Some have settled in the US near renewable energy sources, others have popped up in places like Kazakhstan where fossil fuels still dominate the energy mix. The impact of all this on Bitcoin’s carbon emissions is unclear, as nobody knows exactly where all the miners are located and what kind of energy they use. However, a study published in February by research journal Joule suggested that Bitcoin’s environmental impact has worsened since China’s move, with the share of renewable energy used to power the network increasing from more than 40% in 2020 about 25% in August 2021. And don’t overlook the environmental impact of the growing mountain of older computing equipment being discarded by miners as they try to get a head start on computing power.

5. What are governments doing?

In some parts of the world that have a surplus of renewable energy, bitcoin miners are still welcome. Texas, for example, is trying to capture more of them to act as a source of demand response to meet the state’s variable wind output. In other places they are seen as a threat. The Chinese ban was in response to an electricity deficit that forced it to ration electricity supplies and curb industrial production. Kazakhstan, a major Bitcoin producer, has imposed limits on the industry after facing its own energy shortages. Sweden’s financial regulator has called for a Europe-wide ban on crypto mining, saying it “threatens much-needed climate change.” Some governments would prefer to channel renewable energy into older industries trying to reduce carbon emissions, such as B. Transportation and manufacturing. Other big power users complain that bitcoin miners suck up limited energy resources and return little jobs and tax revenue to the host country.

6. Has the Concern Impacted Crypto Markets?

Yes. In February 2021, Tesla Inc. announced that it had invested $1.5 billion in Bitcoin and will begin accepting the cryptocurrency as payment. The double move was a catalyst for a rally in the digital currency. But this May, Musk announced a stunning about-face, suspending the token’s acceptance, citing environmental concerns. The decision triggered a sell-off in Bitcoin that spilled over into many other digital currencies.

7. What does all this mean for the future of Bitcoin?

Bitcoin’s critics say the energy-intensive “proof-of-work” system used to verify transactions on its digital ledger or blockchain was never designed to underpin what is now a trillion-dollar asset is. Supporters of competing cryptocurrencies have used Bitcoin’s environmental impact as an argument for switching to lower-power alternatives. Many newer blockchains, like Solana and Cardano, use variations of proof-of-stake, an alternative process that uses less power. Bitcoin rival Ethereum is expected to switch from proof-of-work to proof-of-stake in mid-2022, reducing its estimated energy consumption by up to 99%. Bitcoin remains the world’s dominant cryptocurrency, but its energy challenge will grow with its popularity: a rising bitcoin price lowers the breakeven point for miners and gives them an incentive to continue using older, less efficient machines.

Leave a Reply

Your email address will not be published.