Unknowingly, along the way of joining the newest financial trend, global investors including the world’s richest man are opening a wide gate for more carbon footprint with Bitcoin mining.
But What is Bitcoin mining? How is Bitcoin mining correlated with carbon footprint? And what can be done to control its growing environmental impacts?
The global cryptocurrency market is surging at an exponential rate. By market capitalization, digital currency has grown more than 10 times its value in the past years. Bitcoin remains the go-to leader of this space as the world’s top digital currency.
Today, about 18.5 million bitcoins are in circulation. Despite being costly, arduous, and just sporadically rewarding, dozens of companies find the Bitcoin mining business magnetically appealing.
How to Mine Bitcoins?
Auditor miners are in charge of ensuring that Bitcoin transactions are legitimate; according to the founder of Bitcoin Satoshi Nakamoto, by verifying the legitimacy, the miners prevent the cryptocurrency’s “double-spending problem.” It is important to solve the double-spending problem because according to Investopedia, “(with cryptocurrency) there is a risk that the holder could make a copy of the digital token and send it to a merchant or another party while retaining the original.”
Once the miner verifies a Bitcoin transaction worth 1 megabyte known as ‘block’; he is awarded a fixed quantity of bitcoin. When Bitcoin mining first started in 2008, the miners were rewarded with 50 BTC for verifying one block. But the reward amount is halved every four years, thus today a miner will receive 6.25 BTC after deduction on May 11, 2020.
Verifying the transaction is the easy part, but the real race is of arriving first at a solution to the numeric problem amongst all the other miners worldwide.
Though in the past a single miners were able to solve the problem with their at-home computer, now that is no longer the case. Due to the increment in difficulty level (13 trillion times harder than 2009); solving this numerical value in a limited time, supercomputers with a computing speed of more than a hundred quadrillion FLOPS is needed.
This has given rise to the BTC mining companies with gigantic powerheads working 24-hours.
Determining Carbon Footprint
The major problem with Bitcoin mining is not its characteristic of massive energy consumption; it is the area they are located in. Most of the BTC mining companies are set up in a region which heavily relies on coal-based power.
For releasing new BTCs in circulation, miners are consuming huge electrical energy. Data scientists Alex de Vries’ Bitcoin Energy Consumption Index reveals that BTC mining companies alone are adding about 37 megatons of carbon dioxide annually; which is the electricity consumed by the entire Chile in one year.
Another energy consumption figure put forward by Cambridge Bitcoin Electricity Consumption Index shows that annually bitcoin mining consumed more than 110.54 TWh (more than energy consumed by Netherland all year long).
When De Vries broke the figures for every single Bitcoin transaction, the numbers showed that one BTC transaction has a carbon footprint produced after watching YouTube for 69,639 hours or 926,069 VISA transactions. Estimated, the 184TWh (total energy) consumption results in 90.2 million metric tons of CO2. i.e equivalent to London’s carbon emission.
The Other Hazardous Impacts
Other than Bitcoin mining, there are other hazardous impacts associated with the world’s biggest cryptocurrency, which is severely impacting other parts of the economy. For continuously formulating new blockchains, miners need new machines from time to time, as they don’t last long.
For manufacturing the machines, a considerable number of chips have to be produced. For example, for manufacturing one million of these machines, Bitmain, the largest manufacturer, will have to use about a month’s capacity of the chip fabricator (only two chip fabricators are capable of making the needed high-power silicon). Doing this will crowd out the demand for the chips which will be compensated from the other sectors like AI, electronics, transportation, etc.
Furthermore, countries like Iran are luring cryptocurrency miners by providing low-cost power into the country for circumventing the economic sanction imposed by other nations on developing nuclear weapons. As a result of this, today Iran consumed 8% of all the computational power in Bitcoin mining.
How to control the growing carbon footprint?
Cryptocurrency is believed to be the future, and limiting the energy need for is no way forward. Moreover, the only reason behind the environmental concern is the unconventional source of energy used in its mining. A more sustainable form of energy with less carbon footprint can be used in meeting the industry’s growing energy demand.
Furthermore, the increasing economical value of Bitcoin is attracting more miners into the business. Some experts believe the ban of cryptocurrency in digital asset marketplaces could significantly affect the digital currency’s price.
Head of IT, Greenpeace UK, Andrew Hatton says; “As online services become bigger and more complex, the demand for computing power is bound to go up over the next few years, and that will require more energy. The problem is that only about a fifth of the electricity used in the world’s data centers comes from renewable sources, and that’s not good enough.”