Exposing the Environmental Effects of Bitcoin Energy Consumption
When I arrive home from a day of school, my dad is at his makeshift office in the living room, poring over a row of blue-tinted screens. Before the past few weeks, if I asked him what he was doing, it would always be one of two answers. Either he was in a meeting or exchanging emails for work, or he was checking his stock market portfolio on E-Trade. Recently, a new answer to my question has arisen; more often than not, my dad is carefully observing the fluctuations of Bitcoin prices or scouring Youtube for the newest videos explaining the complex nature of cryptocurrency.
The world’s newfound obsession with Bitcoin and cryptocurrency begs an important question; what is crypto, and where does it come from? As for what exactly Bitcoin is, that’s a concept that I’m still struggling to understand. In simple terms, it’s made up of a blockchain, an exchange of financial transactions that aren’t regulated by the higher powers of government or third parties in general. The value of Bitcoin, as well as other forms of cryptocurrency, shoots up and down at seemingly warp speed, as I’ve seen by sitting next to my dad in his office and watching it jump or fall each passing second. Many factors, including the passing of a certain price threshold such as $40,000 or $50,000, accelerate or stunt Bitcoin’s growth. The one that interests me most is the impact that the words and actions of large-scale investors have. For example, when Tesla purchased $1.5 billion in crypto, Bitcoin’s price shot up. In addition, whenever Tesla CEO Elon Musk has tweeted out a good word about Bitcoin, the price has risen in response.
However, Tesla’s support for Bitcoin presents a dichotomy to its mission statement. As stated in Tesla’s Impact Report, their production of electric vehicles works towards a “sustainable energy future”, suggesting lower emission levels and responsible energy use. But, the increasing popularity of Bitcoin is proving to be anything but sustainable, especially in the field of energy consumption. According to Digiconomist’s Bitcoin Energy Consumption Index, this cryptocurrency’s annual carbon footprint is equal to that of New Zealand, and it consumes as much energy as the country of Chile. The Cambridge Bitcoin Electricity Consumption Index shows even higher numbers, highlighting that Bitcoin uses more annual energy than the Netherlands. Single transactions of Bitcoin are still not sustainable, using up the same electrical energy as the average U.S. household does in 22 days.
The annual and single-transaction environmental impacts of Bitcoin. Source: Digiconomist Bitcoin Energy Consumption Index
What contributes most greatly to Bitcoin’s significant footprint is how it’s created. As I mentioned, cryptocurrency is essentially a blockchain. The way that new ‘blocks’, or transactions, are added to this chain is through the process of mining. Bitcoin mining isn’t physically similar to the mining of natural resources, such as coal or gold, but is conceptually similar; thousands of big machines competitively search and scan for specific values that, when found, reward their supervisor with coins. These machines are what use such extreme amounts of energy and pump out carbon dioxide pollution.
In the foreseeable future, Bitcoin will continue to grow, and so will the industry of mining crypto. Therefore, steps must be taken to reduce its detrimental effects on the environment.
First, how the mining business is managed can be changed. Currently, the number of computing resources one has often determines how many block transactions and cryptocurrency they can mine. This is called the proof-of-work validation method and encourages people and companies to keep increasing their computer power, emission production, and energy use without regulation. As an alternative, many experts propose the proof-of-stake validation method, where one must stake their crypto holdings during mining; if fraudulent transactions occur under their name, these holdings, as well as the ability to mine in the future, are lost. Proof-of-authority is also a viable method, where only a select group of trusted individuals and companies perform the mining and validation. Proof-of-authority holds these trustworthy people accountable by putting their reputations at stake, while also minimizing total mining activity.
Blockchains can also be used to raise awareness and create motivation for environmentally conscious behavior. Remember, blockchains are connections between peers and can be used to share information, not just finances. Share & Charge is an example; to promote the use of electric cars, which help reduce vehicle emissions, this organization uses the Ethereum blockchain to connect drivers with charging stations.
Lastly, the actual mining of Bitcoin can become more sustainable. Initiatives such as Cryptosolartech in Spain have projects underway that will use solar and wind energy to mine Bitcoin. If renewable energy sources can be used to mine Bitcoins, even high-energy, proof-of-work operations will harm the environment much less. Companies that prioritize sustainability, such as Northern Bitcoin, which uses 100% renewable energy, must be supported as well. The further growth of Bitcoin and cryptocurrencies as a whole is a definite possibility for the future; just ask my dad and his crypto Youtube videos. So, our job isn’t to halt this growth, it’s just to recognize how this new financial advancement is impacting the Earth.
