The relationship of bitcoins and energy consumption
Bitcoin, cryptocurrency, and the blockchain technology it relies upon have been hailed as beacons of the future since their first emergence some ten years ago. The rise of cryptocurrency technology, and Bitcoin in particular, has completely changed the face of economic transactions for many markets, and continues to play a major shaping role in the development of the economy, technology, and broader society.
As cryptocurrency is a purely digital transaction, on the surface, it may seem unrelated to matters of energy consumption and climate change. However, this is far from the truth, as the widespread use of cryptocurrency may have major ramifications on our energy usage and the climate. As the climate and the ongoing threat posed by global warming are such critical matters of discussion, the impact of a growing technology such as cryptocurrency is urgent to address.
Being so closely associated with the revolutionary possibilities presented by futuristic technology, it may come as a surprise to many that Bitcoin yields such an impact on our energy consumption. In order to better understand the relationship between Bitcoin and our global warming problem, it’s necessary to understand the mechanics of cryptocurrency, its use of electrical power, and the impact this may have on our environment. Students tasked with a global warming essay or a Bitcoin essay may be surprised to discover just how easily these can be combined, as Bitcoin is shaping up to have an increasingly-significant impact on our environment.
How does Bitcoin work
While Bitcoin has become a fairly ubiquitous word, there are many who still don’t understand its mechanics beyond it being a “digital currency.” Bitcoin, as a currency, is built on top of a network technology known as the blockchain. Blockchain technology is a big reason behind the popularity of bitcoin, as it operates through a network that is public, secure, and distributed. This network is made up of many computers connected to one another via the internet, and together they create, store, and verify digital transactions. This process is incredibly secure, offers anonymity, and happens at a lightning-fast rate.
Bitcoin then uses this network of interconnected, privately secured computers to form a digital “ledger” that regulates and keeps track of transactions. One of the unique things about Bitcoins is that blockchain allows it to operate as a decentralised currency – without the need for a central bank or treasury as is the case with traditional currencies. In order to “create” the coins, computers engage in what is known as Bitcoin mining. This requires a computer to dedicate itself to solving complex equations, for which it is rewarded with Bitcoins. The computing power necessary to perform these complex equations and transactions is where the question of energy consumption and global warming comes into play.
Bitcoin’s energy consumption
Being an incredibly sophisticated technology operating using a high level of mathematics, it should come as no surprise that the computers engaging in Bitcoin mining require a lot of energy consumption to do so. However, the sheer amount of energy consumed by bitcoin miners may come as a shock. Some estimate that the annual carbon footprint required to mine and power Bitcoin transactions could be equal to that of several large, developed nations – such as New Zealand or Argentina. Digiconomist has put together a Bitcoin Energy Consumption Index to track the vast amount of energy required to power the currency.
The amount of power needed to process one Bitcoin transaction is equal to that which it takes to process several hundreds of thousands with other online payment systems – such as Visa or Mastercard. And the fact that Bitcoin is growing in popularity at an ever-increasing rate means that there is only ever more incentive for more miners to join the cause. As the price of the currency continues to skyrocket, so do the number of computers competing to perform complex computations in order to mine those precious digital coins. This spells even an even more harmful future when it comes to Bitcoin’s climate impact.
Bitcoin and sustainable business
The damaging environmental impact of Bitcoin is a cause for both climate concern and corporate embarrassment. The forward-thinking, futuristic nature of blockchain cryptocurrency has rendered it a favourite amongst the same kind of new-age companies who love to tout environmentalist sentiments. Companies such as Tesla, PayPal, and Square have all made reputations for themselves as environmental stewards, and yet each has exhibited a penchant for the use or purchase of Bitcoin.
As the environmental impact of Bitcoin only continues to grow worse as more and more computers begin mining and using high quantities of electricity, the call for corporate accountability will also continue to grow. How these companies may reconcile their eco-friendly ethea with their use of cryptocurrency is an increasingly-pressing question.
Solutions for Bitcoin’s climate future
The hope for many, both those who mine cryptocurrency and those who utilise it is that the energy consumption required to power the network can be shifted towards sustainability. Corporate proponents of cryptocurrency have come out speaking in favour of using clean energy for the production, transaction, and monitoring of the currency.
One interesting solution being discussed by corporate players is the use of cryptocurrency as an incentive to further the building of green infrastructure. By constructing new green energy power stations and using the excess energy produced for the mining of cryptocurrency, companies can literally farm extra profits from their power plants. In this sense, the energy-draining aspect of cryptocurrency technology could be viewed as a positive money-making incentive for the construction of sustainable power production infrastructures.
Whether the future of Bitcoin holds more positives or negatives, in the long run, has yet to be shown. One thing that’s for sure, however, is the fact that even the processes going on around us that feel like the least physical can have a major physical impact on the world around us. In the end, everything is connected, and everything connects back to our environment.