In the past years, Bitcoin’s popularity has grown from a simple technology known only to cryptographers to a valuable market cap asset that ranks ninth on the global top assent list.
This dramatic cryptocurrency ascent has reimagined money, made millionaires, and given rise to a billion-dollar industry that gets its inspiration from its decentralized revolutionary technology. However, the cryptocurrency rise also has its undesirable side-effect.
Cryptocurrencies like Bitcoin require high energy to support their underlying network. Considering the energy requirements, crypto mining’s energy requirement are equivalent to Argentina’s. It has increased criticism regarding Bitcoin’s environmental footprint.
As per the University of Cambridge analysis, the cryptocurrency network utilizes more than 121 terawatt-hours (TWh) every year. On comparing it to a country’s electricity consumption, crypto electricity consumption ranks among the top 30 worldwide electricity consumers.
These electricity demands have increased due to the surging Bitcoin prices in the past few months rising from just under $5,000 (in March 2020) to nearly $50,000 today.
Concerns regarding the cryptocurrency’s energy requirements have been around since its initial stages. It involved Hal Finney, a crypto pioneer creating awareness about the potential future of CO2 emissions through his January 2009 tweet. It was only two weeks after the first-ever Bitcoin transaction was received from Bitcoin’s pseudonymous creator named Satoshi Nakamoto.
The energy consumption by the Bitcoin network did not see a potential rise until 2017. The prominent price rally pushed up the energy needs drastically, leveling it to a small country’s energy consumption. With the market cooling off the following year, the energy demands also dropped. However, the latest notable high was around the week of 15 March which was more than double compared to the energy demand almost three and half years back.
Leading cryptography firm IOHK CEO Charles Hoskinson told The Independent, “Bitcoin’s energy consumption has more than quadrupled since the beginning of its last peak in 2017 and it is set to get worse because energy inefficiency is built into bitcoin’s DNA. Bitcoin’s carbon footprint will get exponentially worse because the more its price rises, the more competition there is for the currency and thus the more energy it consumes.”
The Bitcoin mining process is essential for generating new cryptocurrency units. It involves solving arbitrary and complex mathematical equations. These equations currently require high amounts of power for computer processing.
Bitcoin miners hence move to places with cheap electricity prices. It means the underlying issue is the lack of cheap production of renewable energy and not bitcoin.
On the brighter side, solutions are being put in place involving a few eco-friendly mining facilities that operate at large scales.
Norway and Iceland have become popular destinations for crypto miners as these countries produce 100 percent renewable energy. The low temperatures reduce the cooling costs while the cheap geothermal and hydro-electric energy power their machines.
The third Global Cryptoasset Benchmarking analysis by the University of Cambridge in 2020 reported that nearly 76% of crypto miners make use of renewable electricity sources for carrying out their operations.
This trend will continue to rise as per projections by the International Renewable Energy Agency. The agency last year also reported that sources of renewable energy are more cost-efficient compared to fossil fuels.
DigitalMint COO Don Wyper told The Independent, “In its current status, the infrastructure that supports the bitcoin protocol cannot be sustained, but the beauty of the protocol is that the incentive structure will force miners to adopt the cheapest form of electricity, which in the near future will be renewable energy.”
Cardano is an alternative cryptocurrency that seeks to solve the current Bitcoin environmental problems, thus altering the underlying technology to require less power.
According to experts, if the cryptocurrency transition to renewable energy does not happen sooner, consumers and investors will soon have to look for alternative cryptocurrencies that create a lesser impact on the environment.