Cryptocurrency Is A Good Idea On Many Levels And We Believe It Has A Promising Future But This Cannot Come At Great Cost To The Environment Musk Said
Cryptocurrency can be used to buy goods and services, or trade them. Pretty much like any currency, but what makes cryptocurrency so attractive to many people is that it is users based, meaning that you do not need a central bank to control it. In order to make it secure, cryptocurrencies use a technology called blockchain. Blockchain is a decentralized technology that is spread across many computers that manage and record transactions. This technology is created by high powered computers that are constantly solving complex mathematical equations, creating new of transactions, in a process called mining. Mining requires vast amounts of electricity, mainly coming from fossil fuels.
As we said, cryptocurrencies are generated by high powered computers, that need to be working constantly in order to create new blocks. Here lies the problem: a lot of energy is required in order to run such an immense number of computers. The key factor is that most mining facilites in, for example the Bitcoin network, are located in regions that rely heavily on coal-based power. So, even though it seems like a major technological advance: it relies mainly on coal, which is terrible for the environment. A Studie done earlier this year has shown that Bitcoins have a comparable footprint as Morocco. This is a matter that needs to be addressed, technology and innovation need to go head to head with sustainability.
Why Is Bitcoin Bad For The Environment It Spends A Lot Of Energy
Bitcoins public ledger is decentralized, which means it is not controlled by any single authority. Instead, Bitcoin is constantly updated by a network of computers around the world operated by so-called miners.
These miners use purpose-built computers to solve complex math puzzles in order to allow transactions to go through the only way to mint new bitcoins in exchange for being rewarded a small fraction of the Bitcoins transactioned.
Over the last years, with the price of Bitcoin reaching new highs , the attractiveness of mining Bitcoin lead the total energy consumption of the Bitcoin network to grow to epic proportions.
Since mining can provide a solid stream of revenue, the number of people aka miners willing to run power-hungry machines to make a small profit out of every Bitcoin transaction they help approve has skyrocketed.
As a result, the Bitcoin network now consumes more energy than many countries.
According to Digiconomists Bitcoin Energy Consumption Index, Bitcoin has such an impact on the environment considering the huge amount of energy used that it compares to the power consumption of countries like the Netherlands or Pakistan .
Why Is Bitcoin Bad For The Environment
- Charlotte Edwards, Digital Technology and Science
- 7:34 ET, May 13 2021
BILLIONAIRE Elon Musk has rocked the world of cryptocurrency by announcing Tesla will no longer accept Bitcoin payments because of environmental impacts.
The Tesla and SpaceX CEO’s tweet has seen the value of Bitcoin drop but has left many wondering how Bitcoin and the environment are related.
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Tesla Suspends Bitcoin Use Here’s How Mining Cryptocurrency Affects The Climate
Tesla CEO Elon Musk, in what can only be called a sudden “U-turn”, announced late on Wednesday that he was reversing course on the decision to use Bitcoin as an acceptable form of payment for the purchase of vehicles. Citing climate change concerns, Musk declared that the electric vehicle manufacturer is suspending purchases with the cryptocurrency, sending its rates down a free fall.
Elon Musk, the chief executive officer of Tesla, took to his official Twitter handle to post a statement: “We are concerned about rapidly increasing use of fossil fuels for Bitcoin mining and transactions, especially coal, which has the worst emissions of any fuel.”
Elon Musk May 12, 2021
Mining Bitcoin and other cryptocurrencies could leave adverse impacts on the environment, some fear. Here’s the gist of the argument:
Adverse impact on global temperatures
Moreover, studies claim that Bitcoin stands a significant chance to single-handedly drive global warming, producing enough carbon-dioxide emissions to push the global temperature “above 2°C within less than three decades.“
At current rates, such bitcoin mining devours about the same amount of energy annually as the Netherlands did in 2019, the latest available data from the University of Cambridge and the International Energy Agency shows.
Musk’s tweets “inevitable”, investors say
Which Countries Mine The Most Cryptocurrency
As cryptocurrencies are global and decentralised, mining can take place anywhere across the world.
For crypto miners, it therefore makes sense to ply their trade wherever energy is the cheapest and most reliable.
The data on the whole cryptocurrency mining scene is very limited, so well mainly look at Bitcoin mining as a proxy for the whole.
The top countries where Bitcoin is mined are:
- China 46% of all mining. This was around 75% in September 2019 but this has dropped since the Chinese government crackdown in 2021. This has caused many Chinese miners to cross the border into Kazakhstan
- USA 16.8%
- Russia 6.8%
- Iran 4.6%
Other notable Bitcoin mining countries with between 2 and 4% of the total mining include: Malaysia, Ireland, Canada and Germany.
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Are Cryptocurrencies Bad For The Environment Or Can They Be Good
Cryptocurrencies are said to offer a bright future for digital transactions, but do they offer a green future for the environment?
Its likely that youve seen a couple of headlines comparing the energy use of certain cryptocurrencies, such as Bitcoin, with small to medium sized countries. Surely this means that cryptocurrencies are bad for the environment?
According to a certain Mr Musk, cryptocurrencies like Bitcoin are a deep concern for carbon emissions and energy use. Then again, he decided this after he made a tidy $100 million in profit from his public crypto investment.
Theres no doubt that certain cryptocurrencies use a lot of energy. However, it doesnt have to be this way. Its possible for more eco-friendly cryptocurrencies to exist that dont have a significant impact on the environment.
This blog will take a look at:
- How cryptocurrency affects the environment
- How much energy it uses and why
- Where this energy is being used across the world and how this fits in with its environmental impact
- Can cryptocurrencies bring positive change
If you find cryptocurrency too complicated, stick with me. I promise to make this topic as accessible and as simple to understand as possible. By the end, Im sure youll have a much better understanding.
Inside The Big Business Of Bitcoin Thats Making People A Fortune
Thats not to say that blockchain technology is inherently bad there are some theoretical applications of blockchain technology that may actually help the environment. A 2018 World Economic Forum report identified a number of ways that blockchain technology could power solutions to mitigate the climate crisis, including managing transparent supply chains. However, these and other proposed solutions do not directly address the incredibly high energy costs of crypto mining.
Scholars argue that bitcoin emissions alone could raise the Earths temperature by two degrees.
There have also been some suggestions for partial fixes to the energy drain. Many NFTs exist on the Ethereum blockchain, one of the largest crypto platforms currently in existence. The platform has promised to shift to a less energy-intensive standard for validating transactions, moving from a proof of work standard to a proof of stake standard.
Unlike the current proof of work standard, which relies on computers racing to solve complex puzzles as proof to verify transactions and add blocks to the chain, a proof of stake standard would instead require a selection of users to prove their stake in order for any user to add blocks to the chain. This would, at least theoretically, lower the amount of energy needed for each transaction. At least one NFT market, NBAs TopShot, a platform for trading NBA highlight clips as NFTs, already runs on a proof of stake system.
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Why Not Sustainable Energies
Defenders of the use of cryptocurrencies have claimed that the industry can actually help the Electricity industry to become greener, by giving companies that generate renewable power an easy way to monetize energy that otherwise would go to waste. To give an example, by buying the extra energy generated by an hydroelectric power plant during floods, when the plant is able to create more energy than usual or by acquiring the wind energy that wind installations generate at night, when they are at full capacity, but there is no requirement from the population. Furthermore, in April this year, a group of nonprofit companies have created the Crypto Climate Accord, with aims of using 100% renewable energy by 2025.
While those ideas seem good on paper, cryptocurrencies and sustainable energies are not compatible. Renewable energies are an intermittent source of energy, and crypto mining need constant energy to keep generating blocks. A mining computer will not be switched off until it either creates a new block, or is unable to mine crypto at a profit. They do not just consume energy when there is an excess of it, but they require power all the time, even during shortages. That is why crypto have ended up using fossil fuel based power before.
The Dangerous Impact Of Cryptocurrency Mining On The Environment
More and more people are getting into cryptocurrency mining, but how does this process affect the environment?
Cryptocurrency is a digital form of exchange that makes use of a decentralized peer-to-peer network to produce, record, and send the coins over the chain. The mining process involves miners competing to solve complex computing algorithms via cryptographic validation, and the first one who solves the hash gets rewarded in the currency. Blocks of these verified transactions are then added to the chain.
According to researchers from The University of New Mexico who are looking into the environmental impact of crypto mining, there are several areas which are greatly affected by this operation:
What is most striking about this research is that it shows that the health and environmental costs of cryptocurrency mining are substantial larger perhaps than most people realized, said Benjamin Jones, UNM researcher.
But the process of verifying these currencies requires a lot of computational power, which, in turn, demands a huge amount of energy.
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An Important Driver Of Sustainable Development
Despite these issues, UN experts believe that cryptocurrencies and the technology that powers them can play an important role in sustainable development, and actually improving our stewardship of the environment.
One of the most useful aspects of cryptocurrencies, as far as the UN is concerned, is transparency.
Because the technology is resistant to tampering and fraud, it can provide a trusted and transparent record of transactions. This is particularly important in regions with weak institutions and high levels of corruption.
The World Food Programme , the largest UN agency delivering humanitarian cash, has found that blockchain can help to ensure that cash gets to those who need it most.
A pilot programme in Pakistan showed that it was possible for WFP to get cash directly to beneficiaries, securely and quickly, without the need to go through a local bank. The project, Building Blocks, has also been successfully trialled at refugee camps in Jordan, ensuring that WFP could create a reliable online record of every single transaction.
If this can work for refugees, it can also work for other disadvantaged, vulnerable groups. The authors of a report by the UN environment agency, UNEP, suggest that the technology could improve the livelihoods of waste pickers, who eke out a living in the informal economy.
Mining Bitcoin And Green Energy
There are a couple of ways crypto miners â both on the small and the large scale â can offset their energy demands.
According to a Seetee research report by Aker ASA, the $6 billion Norweigan company is establishing mining facilities powered by wind, soÂlar, and hyÂdro electricity. âBitÂcoin is, in our eyes, a load-balÂancÂing ecoÂnomÂic batÂtery,â the company says, âand batÂterÂies are esÂsenÂtial to the enÂerÂgy tranÂsiÂtion reÂquired to reach the tarÂgets of the Paris Agreement.â
Likewise, Blockstream CEO Adam Back, whose company has run mining facilities since 2016, said in an interview that Blockstreamâs miners use a mix of energy sources, including hydropower.
âWeâre also currently investigating the viability of developing a new solar-powered facility with one of our institutional clients,â Back said. âThanks to our Blockstream Satellite service â which broadcasts the Bitcoin blockchain to most of the world â we can go where other miners can’t. This allows us to better access stranded energy resources that are not only typically more green, but also provide competitive energy prices for our clients.â
âWeâve got about 2000 miners running now between four of us,â BreakTheirRules says in a direct message. âWe had looked into relocating to several states and where we ended up kind of just worked out cause the power company had a bunch of excess energy they were going to have to waste.â
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The Environmental Impact Of Crypto And Blockchain
Crypto’s decentralised approach relies on its peer-to-peer verification process. This makes the system more secure and transparent but also more energy intensive.
Take Bitcoin for example.
Users in the network get rewarded for validating new blocks and adding them to the ledger. But that’s not all they have to do to get rewarded. They must also guess a 64-digit hexadecimal number before anyone else.
Or rather, their computers must. Computers with greater processing power can make more guesses more quickly. The more guesses made, the more likely a user or a “miner” is to get rewarded. This proof-of-work system compensates miners for the time, effort and processing power used to ensure the currency’s smooth running.
And game theory is at the heart of crypto’s reward system.
Cryptos like Bitcoin set clear protocols and use incentives to ensure that miners uphold best practices. It’s in the miner’s best interests to comply because that’s how they get rewarded. There’s less incentive to try and cheat the system because those miners will get punished.
Game theory isn’t only used in crypto. It’s used in the fitness world, too. Take Energym’s recent partnership with Sweatcoin, for example. Users earn coins to spend on rewards just for working out. It incentivises behaviour change.
But what does all of this have to do with the environment?
This adds up to a lot of electricity being used during the mining process and is at the heart of crypto’s high energy usage.
Popular Cryptocurrencies: Which Is The Most Environmentally Friendly
The past decade has seen cryptocurrencies rise from relatively unknown fringe currencies to headline-hitting digital assets capable of shaking up the financial industry. These currencies have recently become one of the most valuable assets on the planet, and experts predict that coming years could continue to see their usage surge. But while this is great news for investors, the rise of cryptocurrency isnt completely without its downsides.
One of the key problems of cryptocurrencies lies in the environmental impact that digital transactions have. The process of mining for bitcoin is particularly energy-intensive, due to the complex mathematical calculations that must be completed to create each and every new bitcoin. Consider this on a global scale, and you might be surprised to hear that the amount of power needed to deal in cryptocurrencies is similar to that of a small country.
With concern over the environmental impact of cryptocurrencies growing, increasing numbers of investors are looking for new ways to enjoy the benefits of digital currencies in more eco-friendly ways. Of course, no two cryptocurrencies are the same and this extends to the environmental impact of the currencies too.
Here we have looked at the most environmentally-friendly cryptocurrencies available today, focusing on what experts are doing to limit the ecological damage that they might cause.
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Why Elon Musk Just Declared Bitcoin Dirty Money
Elon Musk just redefined the term dirty money and the investment world may never be the same.
On May 12, the Tesla Inc. cofounder surprised lots of folks by tweeting:
Tesla has suspended vehicle purchases using Bitcoin. We are concerned about rapidly increasing use of fossil fuels for Bitcoin mining and transactions, especially coal, which has the worst emissions of any fuel.
Cryptocurrency is a good idea on many levels and we believe it has a promising future, but this cannot come at great cost to the environment.
The Bitcoin price tumbled instantly after Musks tweet falling from $54,800 to $46,000 in less than two hours. One week after Musks tweet, the Chinese government announced a Bitcoin ban of its own and the embattled cryptocurrency tumbled as low as $30,000, before bouncing back toward $40,000.
Bitcoin is still reeling from these dual sucker punches. Perhaps it will recover its losses over the next few days, and then take another run toward its record high near $65,000.
But I suspect Bitcoin has suffered some serious reputational damage that cannot be easily undone. In all likelihood, that damage will spread like a contagion from the cryptocurrency markets into the stock market, especially the ESG sectors of the stock market.
But not any longer.
ESG Investors May Abandon Bitcoin
Musks tweet eliminated that option.
When he publicly rebuked Bitcoin for its insane energy consumption, he fired a shot across the bow of the SS Willful Ignorance.
Current Energy Consumption From Bitcoin Mining
Bitcoin is considered the first and foremost cryptocurrency on the market. Image: Igor Batrakov/Shutterstock
Today, bitcoin mining is estimated to consume around 70 terawatt hours of energy per year, which corresponds to 0,33% of the world’s electricity production .
The new bitcoin network, according to specialists on the subject, will be composed increasingly of efficient platforms and with double the ‘hashpower’ for the same electricity demand, significantly improving the energy consumption ratio.
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