Environmental Impact of Bitcoin
”Tesla has suspended vehicle purchases using Bitcoin” said a tweet posted on May 13 by the world renowned Entrepreneur / Crypto Influencer / “Technoking” at Tesla, Elon Musk which not only flattened the curve of Bitcoin’s growth in market but smashed it down by a huge 20% within a few days. ”We are concerned about rapidly increasing use of fossil fuels for Bitcoin mining and transactions” reasoned the post for putting a halt on all transactions through Bitcoin. Speculations around the topic surfaced on the internet while Indian crypto enthusiasts flooded twitter with posts and memes drawing comparisons to the 1992 scam. Was the crypto hype just a balloon to be popped for profit? Do Bitcoin mining and transactions actually have an impact on the environment? Was “increasing use of fossil fuels” the reason for Tesla to take their hands off of Bitcoin? Or was it just an excuse to cash out?
“The mining industry might make wealth and power for a few men and women, but the many would always be smashed and battered beneath its giant treads.” said Katharine Susannah Prichard in 1983 for traditional mining of resources, Does the statement apply to today’s Bitcoin market? Let’s take a ride down the crypto mines.
Bitcoin mining is the process by which new bitcoins are entered into circulation. New coins are mined using computers to solve complex mathematical algorithms or puzzles, which sounds simple enough on the surface. The cryptocurrencies are based on a decentralized network that needs to be mined. As of now, around 18.5 million bitcoins are in circulation and per the ‘Bitcoin Protocol’, the total number of bitcoins will be capped at 21 million. However, the rate of bitcoins mined gets reduced everytime a new coin circulates over the network. As more and more bitcoins are mined, computational power required to mine rises, and so does the energy consumption.
Today, mining for cryptocurrencies often relies on electricity generated with fossil fuels. A study by University of Cambridge estimated consumption of more than 120 Terawatt Hours (Twh) energy per year in Bitcoin mining alone which is equivalent to the electricity produced by 35 coal power plants (standard 500 megawatt) per year and close to annual electricity consumption of Countries like Norway and Argentina holding a rank among the top 30 energy consumers if it were a country. An index compiled by Digiconomist that publishes estimates of bitcoin’s climate impact showed also that it consumes an estimate of around 129 Twh per year with estimated carbon footprints comparable to Morocco.
Let’s break it down even further with an example, A single bitcoin transaction has a carbon footprint of 0.35 tonnes CO2, which implies that 9 transactions produce around 3 tonnes of CO2. For reference, A 12-hour flight from London to Hong Kong releases 3 tonnes of CO2. According to bitinfocharts, Bitcoin sits on an average of 9000+ transactions made per hour with an average of more than 2.5 lakh transactions per day. A Harvard study claims that, if bitcoin were to follow the rate of adoption of other adopted technologies, bitcoin emissions could alone push global warming above 2 °C within less than three decades. Now, It is upto you to formulate the equation of Bitcoin’s impact with its merits.
Elon clarified on 17th may that Tesla’s 1.5 billion dollar worth bitcoins haven’t been touched, he further adds that he still stands high in the march of cryptocurrency and Tesla will start accepting transactions in BTC as soon as a more sustainable mining method comes into place. Many say that the energy consumption in the Bitcoin chain can’t be optimised further, people can be seen switching to more environmentally efficient cryptocurrencies like Dogecoin, Chia, SolarCoin. To complete one successful transaction, bitcoin consumes 707 KiloWatt-hour energy while Dogecoin uses a mere 0.12 KiloWatt hour. While more and more environmentally friendly Altcoins join in on the rally, Vitalik Buterin founder of Ethereum announced Ethereum is soon to undergo a technological makeover claiming to lower its energy consumption by up to 99 percent.
During the industrial revolution, despite many environmentalists raising their voices against the industry’s massive impact on the environment, the major names in the industry continued to capitalize on the growth instead of finding a better cleaner source of energy. This is exactly what Elon musk is trying to get away from. In early Feb, After Tesla announced its 1.5$ billion dollar investment in Bitcoin, David Gerard, author of Attack of the 50 Foot Blockchain said “Elon Musk has thrown away a lot of Tesla’s good work promoting energy transition”, ending the interview expressing his hopelessness questioning if elon could ever walk this back effectively. As it turns out, taking a U-turn did come with its fair share of criticism and backlashes. Elon walking back from crypto crashed it down just like it pumped it up. But it did bring light to the less trendy side of Bitcoin. Governments across the globe have had their plate full trying to figure out ways to decrease carbon footprints of industries currently set up, appending more to the list would only make things worse. Having said that, implementing decentralized blockchain for p2p transactions is still a big step in progressing towards the future of technology. After the big “dip”, We have witnessed active steps taken towards a more eco-friendly integration of Cryptocurrency. From the barter system to virtual coins today, We as a society have evolved by leaps and bounds and while change is certain to happen, it should not be at the expense of mother nature.