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Bitcoin mining is a term used to describe the process by which bitcoins are given to a computer to solve a series of complex algorithms. Since multitasking involves the processing of large amounts of data, Bitcoin mining is a very energy-intensive process. That amount of energy has had ever-greater effects on international electricity and could even severely affect the natural environment.
Growth of value equals additional electricity usage
The value of bitcoin has skyrocketed over the past year. Yet, accompanied by the increased value is the huge amount of energy consumed.
Recently, the value of the cryptocurrency has stalled after crossing the 50,000 USD milestone but the amount of energy used to create it continues to skyrocket. According to Cambridge’s Bitcoin Power Consumption Index (a tool invented by researchers at Cambridge University to measure energy use from money), the amount of electricity consumed from Bitcoin mining is already equivalent to Argentina’s annual carbon footprint.
Elon Musk – bitcoin billionaire
The interest of big Wall Street institutional investors (Wall Street is an eight-block street in New York City’s financial district – often referred to as important financial problems in the US) such as JPMorgan and Goldman Sachs prompted the value of the cryptocurrency Bitcoin to soar. In addition, Elon Musk’s endorsement of Bitcoin also gives mid-range investors more confidence to pour their reserves into the virtual currency Bitcoin. This caused the value of the coin to skyrocket even further, reaching unprecedented heights in history.
In less than a month after investing in bitcoin, Tesla made a profit of about 1 billion USD when the value of Bitcoin reached nearly 60,000 USD/bitcoin. However, this momentum has met a huge obstacle that caused Tesla and Elon Musk to reevaluate the value of this cryptocurrency.
The recent events encompassing Elon Musk have raised many doubts about the future of Bitcoin. This is because recently, Elon Musk has lost about 30 billion USD due to the company’s stock depreciation along with the devaluation of Bitcoin. Comes with a value that is not on a solid, secure basis, and highly vulnerable to social media, Bitcoin also poses a threat to Elon Musk’s Net-Zero goal. This has caused the world’s leading companies/corporations and national governments to reflect thoughtfully and weigh sharply about the positive values and negative effects of Bitcoin.
The amount of energy required to mine Bitcoin is enormous
In the relatively short history of bitcoin (about 12 years), this currency increasingly shows its terrifying ‘energy-absorbing’ nature. As per the rules designed by the creators of Bitcoin, the amount of Bitcoin that can be mined is limited to 21 million Bitcoin. Before, it was possible to mine bitcoins on an ordinary computer. However, with more bitcoins mined, the algorithms that have to be solved to get bitcoin have become much more complex.
As of now, more than 18.5 million bitcoins have been mined. As a result, the average, civilian computer is no longer competent to mine bitcoins. In order to mine bitcoins at today’s scale, ‘Bitcoin miner’ requires special sets of computers with high processing power, and obviously, these computers need a lot of electricity to run.
“The amount of electricity used to mine bitcoin is more than the electricity used by an entire country like Ireland,” said Benjamin Jones, a professor of economics at the University of New Mexico who has studied the environmental effects of bitcoin.
“We’re talking about many terawatts, tens of terawatts of electricity a year just used for bitcoin mining … That’s a huge amount of electricity.” He added.
Mixed opinions between the two sides who supported and objected Bitcoin cryptocurrency
Advocates of bitcoin say that today, most Bitcoin mining is powered by renewable energy sources. This is because renewables have become much cheaper and more efficient than other types of energy. Furthermore, they also argue that the amount of energy used to mine Bitcoin is actually less wasteful than the energy used for ineffective activities which has much more destructive consequences to the environment. According to Cambridge’s Bitcoin Power Consumption Index, only the amount of energy wasted by appliances that are plugged in but not working in US homes can provide enough energy to mine Bitcoin for 1.8 years.
Bitcoin proponents have made it clear that they believe that any environmental costs associated with bitcoin mining are worthy of the positive influences it can have on society.
However, another opinion from environmentalists is that mining bitcoin is still potentially dangerous. This is because ‘Bitcoin miners’ will go wherever the cheapest electricity is available to maximize the benefits of mining Bitcoin. According to Cambridge, by far, China has the largest number of bitcoin miners in the world. Although China has a target of achieving Net Zero by 2060 and has made significant strides in the energy sector, the country still relies on fossil fuel sources to provide two-thirds of its electricity nationwide.
Since no government agency or organization has an official track record of where bitcoin is mined and the type of energy miners are currently using, there is no way to know for sure about the ratio of renewable energy and fossil fuels used in Bitcoin mining.
Additionally, Bitcoin mining rigs can move from place to place depending on energy prices in each country, so it’s especially difficult to keep track of Bitcoin mining activities.
1 Bitcoin transaction is equivalent to 51,210 hours of YouTube viewing
Cambridge estimates that bitcoin’s annual electricity consumption fluctuates above 115 terawatt-hours (TWh) while the Digiconomist’s index suggests that fluctuations are close to 80 TWh.
As reported by these websites, 1 single bitcoin transaction has the equivalent of 680,000 Visa transactions or 51,210 hours of YouTube.
An article conducted by the Oak Ridge Institute in Ohio in 2018 shows that a dollar in bitcoin’s value costs 17 megajoules of energy, more than double the amount of energy needed to mine a dollar according to the value of copper, gold, and platinum. Another UK study published last year says that the computing power required to mine Bitcoin in 2019 has quadrupled from the previous year, and that mining has had an effect on the prices in some electricity and utility markets.
Ria Bhutoria, research director at Fidelity Digital Assets, spoke of Bitcoin’s energy requirements: “Bitcoin will not be able to fulfil its role as a global system for storing and transferring value without costing maintenance.”
Investor Tyler Winklevoss wrote on Twitter: “Computers and smartphones have much larger carbon footprints than typewriters and telegraphs. Sometimes a technology is so revolutionary and important for humanity that society accepts the tradeoffs.”
Ethereum – A promise of a more efficient mining environment
Some analysts have pointed out that there is no need for trade-offs between cryptocurrencies and the environment. The creators of ethereum currency which is considered to be the second most popular cryptocurrency after Bitcoin have promised to change the coin’s algorithm to make its mining more eco-friendly.
Vitalik Buterin – one of the co-founders of Ethereum – told IEEE Spectrum that “mining cryptocurrency can be a huge waste of resources, even if you don’t believe that pollution and carbon dioxide are an issue. There are real consumers – real people – whose need for electricity is being displaced by this stuff.”
Currently, Ethereum mining has the same principle of operation as Bitcoin mining. That is, more powerful computers have an advantage in making more virtual currency. Ethereum’s developers are working to come up with a new operating principle in the system that aims to reduce the amount of energy required to use in Etherum mining. Thereby, the miners will join a pool and are randomly selected to complete the transaction. Upon completion of the algorithm, they will receive one ether. This method is called “proof-of-stake” (PoS).
However, the change in Etherum’s operating system does not mean that Bitcoin will learn and follow. With Bitcoin still reigning as the world’s leading cryptocurrency, accompanied by endorsement, continued support of companies and investment banks, the impact of this currency on the environment and the power sector will only skyrocket from now on.
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