Home Uncategorized Bitcoin Is Red Hot. Can it ever be Green?

Bitcoin Is Red Hot. Can it ever be Green?


Is cryptocurrency destroying the planet? Digital assets such as Bitcoin depend on so-called miners running around-the-clock electricity to run the massive server farms that support them. The industry’s carbon footprint has grown so fast that it is worrying climate campaigners, governments and other big energy users. China banned cryptocurrency mining in 2021 and Elon Musk stopped accepting Bitcoin as payment for Tesla electric cars. When Bitcoin rival Ethereum slashed its power consumption with a major update in September, it put pressure on other parts of the crypto world to clean up its act.

1. How much energy does crypto use?

The Cambridge Center for Alternative Finance estimates that Bitcoin’s estimated energy use has risen from 14 terawatt-hours annually in 2017 to 105 terawatt-hours in 2021, which is more than the entire domestic consumption of Belgium. He expects demand to decline in 2022, when the fall in the value of cryptocurrencies puts some miners out of business. However, research platform Digiconomist has predicted that pollution from generating electricity for cryptocurrencies will still amount to around 64 million metric tons of carbon dioxide in 2022, which is more than the annual global emissions that would be avoided by the increased use of electric vehicles.

2. Why does cryptocurrency need so much energy?

Bitcoin and many other networks use an algorithmic process called “hashing” to order transactions on the blockchain. This creates an array where miners compete to guess in a brute force effort that can span trillions of attempts. The first to succeed is rewarded with newly issued coins in a process known as “proof of work”. As more miners come in, it becomes harder to predict, forcing them to invest in more and more powerful machines. Many miners now have thousands of computers running in cavernous vaults.

3. How are miners trying to reduce their carbon footprint?

Some have set up shop in places like Norway and Texas, where emissions-free solar, wind or hydropower is plentiful. Miners say their presence encourages the development of these clean energy sources by helping to balance the grid — buying excess renewable energy when it’s plentiful and turning off their computers when electricity demand threatens to outstrip supply. Some miners have put solar panels on top of their server rooms or signed contracts to buy low-carbon nuclear power. Others generate energy from excess natural gas that would otherwise be “flared” or burned for disposal.

4. So is cryptocurrency going green?

It’s hard to say. A February 2022 study in the research journal Joule found that Bitcoin’s environmental impact worsened after China’s mining ban, with the share of renewable energy used to power the network falling from 40% in 2020 to around 25% in August 2021. guessed that it fell to become close to zero-carbon energy sources after the ban, while others have emerged where coal still dominates the energy mix. The picture got even darker with the “crypto winter” of 2022, which caused some of the less efficient mining operations to shut down.

5. How are governments responding?

Some oppose cryptocurrency production to protect environmental goals and the stability of power grids. China’s ban was in response to electricity shortages that forced the government to cut industrial production. Iceland, Iran, Kosovo and Singapore have also restricted the production of cryptocurrency. The European Commission in October called on member states to suspend and prepare to close tax breaks for miners in response to the region’s energy crisis. Some governments prefer to reserve renewables for older, energy-intensive manufacturing industries trying to decarbonize.

6. Is Cryptocurrency’s Carbon Footprint a Turnaround for Users?

Some big companies and investment funds fighting climate change have been prevented from investing in cryptocurrency. Ethereum’s switch to a new system known as “proof of stake,” in which people offer or distribute some of their tokens for the ability to order and confirm blocks of transactions, has reduced its energy usage by more than 99%. Ethereum’s backers hope this will change the minds of developers who are reluctant to use the platform for finance, gaming and other applications because of its large carbon footprint.

7. What does this mean for Bitcoin?

Climate activist groups have urged Bitcoin’s backers to find their own low-energy technology, but many of the token’s staunch supporters oppose tampering with the system. And it is not clear who will lead such a change. The Ethereum transition was initiated by the Ethereum Foundation, which was established to ensure the long-term success of the token. A number of organizations advocate for Bitcoin, but it has no clear leader.

–With assistance from Eric Lam, Olga Kharif and Josh Saul.

More stories like this one are available at bloomberg.com

Source link