The true cost bitcoin.
By Mathilde Midttun
Cryptocurrency has become all the rage in recent years, and the means of performing online financial transactions has revolutionised the payment system. Yet, at what cost?
Since it was founded in 2009, Bitcoin has skyrocketed from a fringe technology to become the most popular blockchain-based cryptocurrency [2]. The currency is global, digital and decentralised, and can offer faster, cheaper, and more secure monetary transactions than conventional currency [9]. At a price of up to $US60,000 [4], Bitcoin has launched a multi-billion-dollar industry [3].
The Bitcoin technology is well deserving of recognition, however, the non-virtual aspect of the phenomenon gets far too little attention. While Bitcoin is a digital concept and thus does not directly harm the environment, the underlying technology has a considerable impact on the climate [7]. Generating new units of cryptocurrencies like Bitcoin involves a process called mining, which calls for ample amounts of computer processing power to solve complex math problems [1, 3]. The mining process is highly energy intensive; the energy required to conduct merely one Bitcoin transaction is enough to power a typical US household for a whole month [6]. In fact, analysts at the University of Cambridge found that the Bitcoin network annually consumes over 120 terawatt-hours (TWh) of electricity [3]. To exemplify, they assert that if Bitcoin represented a country, it would rank in the top 30 electricity consumers globally.
Even so, it is not solely the amount of energy used for cryptocurrency generation that causes concern, but also the type of energy consumed. The majority of Bitcoin mining occurs in China [3], where energy is typically less taxed and often derived from non-sustainable sources like fossil fuels [1]. Although renewable energy is available, miners tend to gravitate toward cheap power since the mining process calls for such profound amounts of energy, and cheap, renewable energy is scarce in the country [3]. To illustrate, Bitcoin’s estimated carbon footprint is comparable to that of New Zealand, at 37 million tons carbon dioxide annually [1].
While there is growing consensus on the environmental concerns that Bitcoin mining raise, some argue that the technology is undeserving of such criticism [5]. To begin with, a common argument is that the energy used for mining would otherwise be wasted [1], for instance in southern China where the energy demand at times is lower than the supply. Furthermore, some claim that the cryptocurrency lays a foundation for development in the renewable energy field [1]. Start-ups are already using the blockchain technology as a device to improve the accessibility and sustainability of energy grids [8]. The idea is that consumers can gain total control over what energy they wish to use, which is likely to drive competition and thus promote renewable energy. Accordingly, blockchain may hold opportunities for a long-term reduction of carbon emissions globally.
Then, what should we think about Bitcoin? The fact is that Bitcoin’s vast energy consumption does indeed have an undesirable impact on the environment. Nevertheless, this cannot be viewed in a vacuum; other factors indicate that there are advantages to Bitcoin, too. Still, unless the technology can contribute to the development of the renewables field, the future of companies like Bitcoin remains grim from a climate perspective.
[1] https://www.bloomberg.com/opinion/articles/2021-01-26/is-bitcoin-mining-worth-the-environmental-cost
[2] https://www.coindesk.com/price/bitcoin
[4] https://www.statista.com/statistics/326707/bitcoin-price-index/
[6] https://earth.org/are-cryptocurrencies-harming-the-environment/
[7] Egiyi, Modesta & Ofoegbu, Grace. (2020). Cryptocurrency and Climate Change: An Overview. International Journal of Mechanical Engineering and Technology, 11 (3). Page 15-22.