More Energy Than Whole Countries: Is Bitcoin Mining Really Bad For The Environment?

Bitcoin critics argue that it requires more electricity to mine than some countries consume. For example, US Senator Elizabeth Warren and billionaire Elon Musk have already announced that cryptocurrency mining is not environmentally friendly. However, attempts to create a cryptocurrency that does not harm nature so far lead to the opposite effect, and statements on this topic on the Internet are often populist, analysts say.

Senator from Massachusetts, Elizabeth Warren, criticized Bitcoin due to its environmentally unfriendly speech at a hearing of the Senate Banking Subcommittee. “Mining bitcoin requires so much computing activity that it consumes more energy than entire countries. One of the easiest and least destructive things we can do to combat the climate crisis is to suppress ecologically wasteful cryptocurrencies,” Warren said on Twitter after the hearing. She is not the first to accuse cryptocurrency miners of harming the environment.

However, attempts to make digital money environmentally friendly so far lead to the opposite effect, and public figures take the opportunity to speak out on a “hot” topic, analysts point out.

The Hype On The Topic

Twitter users immediately reacted to Warren’s comments. Under her post on the dangers of bitcoin, they published pictures with diagrams about how much electricity the banking system consumes and wrote that bitcoin is a driver for developing ecological methods of electricity production.

The first comment on Warren’s publication, which received more than 5000 likes, was left by the Kraken crypto exchange marketing director Dan Held: “Cancel the Christmas lights !!!”. His tweet was complemented by a picture of a Business Insider article with the headline “US Christmas Lights Consume More Electricity than Whole Countries.”

The director of the Digital Currency Initiative at the Massachusetts Institute of Technology, Dr. Neha Narula, also noted in the comments, who described the energy-intensive process of bitcoin mining and called it “a fairly fundamental part of basic bitcoin security.” In response, the senator said she was disappointed that computers around the world “spit out random numbers around the clock in a competition to try to solve a useless puzzle and win a bitcoin reward.” Warren also added that the amount of energy required for this process is “a disaster for the planet.”

In May 2021, Tesla CEO Elon Musk became concerned about the impact of cryptocurrency on the environment. He stated that the company is suspending an experiment to pay for purchases of electric vehicles with bitcoins due to the non-environmental friendliness of their mining. “We are concerned that more and more organic energy sources, especially coal, are being used for mining and transactions with Bitcoin, which is the worst fuel of all in terms of emissions,” Musk said on his Twitter account.

According to him, cryptocurrency is a good idea, but it cannot cost the environment that much. At the same time, in February, Tesla acquired bitcoins for $ 1.5 billion: Musk promised not to sell them and start accepting cryptocurrency as payment when its mining becomes more environmentally friendly.

The statements of politicians on the topic of cryptocurrencies are rather populist in nature: this is an attempt to gain votes by speaking out on a hot topic, said Evgeny Shatov, a partner at Capital Lab. He is confident that if this agenda is picked up, for example, by US President Biden and supports calls to ban mining, then this will show the seriousness of the US authorities’ intentions to combat cryptocurrencies, including due to concern for the environment. “But the likelihood of this is small, so in the coming months, there will be no significant changes on this issue, at least in the States,” he says. 

Eco-Effect

Since the number of bitcoins is limited, the more cryptocurrency mined, the more difficult it is to mine a new one. This and the increasing price of bitcoin encourage miners (those who mine cryptocurrency) to connect even more computers to their networks. However, the more computers are running, the more electricity they consume.

Every day, bitcoin mining speed decreases due to the increase in the complexity of calculations, Shatov says. With a sharp rise in prices for cryptocurrencies in the last year or two, their popularity has grown, which means that more and more computing power is involved in the mining process.

Consequently, energy consumption is growing. Now it is estimated by scientists at the University of Cambridge that 97.9 terawatts/hour of electricity is consumed per year during the extraction of bitcoins/hour of electricity. This is more than the Philippines (93.3 terawatts/hour) and Kazakhstan (91.7 terawatts/hour) consume per year. Back in 2018, energy consumption for bitcoin mining was almost 0.5% of the global total. 

Also Read: Fiscal Boundaries: Why Digital Tax Is Inevitable

 

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