Is the carbon footprint left by Bitcoin mining a risk to the environment, or is it a red herring? This is the question being asked on World Environment Day this year, where the theme is Reimagine, Recreate, and Restore.
As the U.N. begins the task of restoring the world’s natural ecosystems, it is hard not to factor in the environmental impact of crypto mining. With the ever-increasing interest in blockchain technology and crypto such as Bitcoin, there is considerable debate on Bitcoin’s carbon footprint.
There is little doubt that concern is growing. This is evidenced by the recent crash that resulted from Elon Musk declaring that, due to environmental concerns, Tesla would no longer honor Bitcoin as payment for the company’s electric vehicles.
In May alone, Bitcoin dropped by over 35 percent, hitting a new low price of $34,195. May represents the second-largest single-month drop on record, the largest being a 40 percent drop in September 2011.
Blockchain is a powerful technology that is being employed across an ever-expanding range of sectors. Unfortunately, the energy footprint is seen as being unsustainable at the current rate.
Bitcoin, uses a “proof-of-work” algorithm. This algorithm must be solved using complex calculations in order to mine Bitcoin tokens. The same holds for Ethereum.
The energy required to solve these complex calculations results in extremely high energy consumption. Studies conducted by the University of Cambridge resulted in the conclusion that Bitcoin alone uses approximately 0.6 percent of the energy consumed, worldwide. To put this in perspective, that is more electricity than that used by Argentina in a year.
Although Musk is influential, he is not the only reason for the significant drop in Bitcoin prices.
In 2019, Chinese President Xi Jin Ping made a pledge while addressing the U.N. General Assembly. He stated that, by 2030, China would halt the rise in carbon emissions, aiming to become carbon neutral by 20160. This goal is included in China’s 24th, five-year plan.
As the country works towards hitting these ambitious goals, a growing concern has been crypto mining in the country. Bitcoin miners in China account for more than 65 percent of the computing power used in this endeavor. On April 6th. The Academy of Sciences at a prestigious Chinese university stated that without serious intervention, Bitcoin mining could easily upset the emission reduction efforts announced by President Ji.
The research paper noted that the Bitcoin mining industry in China would peak at close to 300 terawatt-hours in 2024, resulting in the generation of 130 million metric tons of carbon emissions. Should this happen, it would exceed the energy consumption of the Kingdom of Saudi Arabia and Italy combined.
With these revelations, China has taken a hard stance against crypto mining as well as crypto trading. This stance has resulted in an exodus of miners from China to other parts of the world.
Bitcoin’s Carbon Footprint
The carbon footprint of Bitcoin mining has long been an issue that needs to be addressed by the industry. Some argue that mining activities promote energy efficiency by using unused energy from the grid. However, regardless of the arguments put forward, there is no denying that the continued demand for power does little, if anything, to contribute to a sustainable future.
Although Bitcoin mining does contribute to the problem, it is not only a Bitcoin problem. Governments have been pushed and prodded several ways to shift from fossil fuels to renewable alternatives. Advocates say that the energy issues associated with Bitcoin mining are something of a red herring.
According to a recent report published by a respected crypto investment firm, the mining of Bitcoin uses half of the energy used by the traditional banking system. The report goes on to say that gold mining uses twice the resources of what Bitcoin mining does.
Bitcoin mining is not the major issue for the environment, however, it is an issue that does need to be addressed at an industry level.
Stefan Rust of Sonic Capital may have said it best. To him, every day is World Environment Day and the industry and those involved in it should be focused on protecting the environment every day.
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