What Are The Major Concerns?
Bitcoin mining has created quite a stir in the marketplace. It's no mystery that Bitcoin mining consumes a lot of energy, resulting in increased carbon emissions.
Bitcoin mining refers to the process of verifying bitcoin transactions and documenting them in the public blockchain ledger. Miners are the individuals who use high-powered machines with extremely high computing capacity to validate these transactions through the Bitcoin blockchain.
People from the industry argue that this mechanism has several benefits to overregulated currencies since it does not depend on a centralized intermediary. Bitcoin pioneers such as Billy Silbert, the founder and CEO of Digital Currency Group, believe Bitcoin is proving to be a viable gold substitute. However, mining puzzles necessitate several energy-intensive computations.
As a result, variations in Bitcoin price are closely related to the amount of energy consumed. For example, as the price of bitcoin increases, so will the energy demands. According to a University of Cambridge report, Bitcoin mining consumes more than 120 TWh each year.
While institutional investors continue to embrace the digital currency, one controversy has emerged regarding its relationship to environmental and energy concerns. ESG researchers concluded that the cryptocurrency is harmful to the environment because it requires too much power to mine a single Bitcoin.
However, according to CoinDesk's recent report, this is not the case, claiming that leading cryptocurrency does not consume as much electricity as some might think.
"The network maintains unity and credibility by Bitcoin's energy-intensive consensus protocol. If reaching a consensus was easy, the network could be easily hacked. However, mining consumes so much energy that attacking the Bitcoin network is incredibly expensive."
Bitcoin Mining And Power Demand
Bitcoin mining is typically based on a cryptographic protocol. In general, mining uses blockchain ledger technology, and ledgers keep accounts of all transactions made by operators. The approved and verified transactions in the network are referred to as blocks, and these blocks are then assembled to form a chain, which is commonly referred to as a blockchain network.
These blockchains are established by many extremely advanced algorithmic programs running on several computers, requiring enormous amounts of power derived from various sources. While computing the amount of energy required, hashrates play a crucial role in determining how much electricity is being used.
Mining hash-rate is an important security metric, and the greater the network's hashing capacity, the greater its security and overall resistance to attack. Although the precise hashing power of Bitcoin is unclear, it can be estimated based on the number of blocks mined and the blockchain difficulty.
On the other hand, higher hash rates imply higher power demand and a greater strain on different sources of energy. Many critics use this example to illustrate Bitcoin mining vulnerabilities, but are they missing the point?
We can only assume that rumors of cryptocurrencies wreaking havoc on the world are highly distorted. Internal review of transaction volumes reveals that Bitcoin's power use does not fall outside of the realm of intermediary payments networks.
Furthermore, Bitcoin developers would be interested in lowering the per-transaction energy cost of mining, or the network would fail to scale and compete with incumbents.
Bitcoin Mining, Power Consumption And Environmental Concerns
According to analysts, the cryptocurrency consumes as many resources as American Airlines, Greece, or the United States federal government as mining machines solve mathematical problems to develop the blockchain database.
According to Galaxy Digital, a New York-based crypto company founded by former hedge fund manager Michael Novogratz, the leading cryptocurrency utilizes much less energy than banking and gold.
Environmental issues are definitely not something to overlook because coal and fossil fuels are the primary components of generating electricity, and 65 percent of Bitcoin mining took place in China, mostly dependent on fossil fuels.
The burning of coal is a significant cause of climatic changes in the environment, leading to excessive CO2 emissions and contamination.
According to a CNBC study, the leading cryptocurrency mining emits 35.95 million tons of carbon dioxide per year, nearly equal to New Zealand's total electricity consumption.
BTC also generates a significant amount of greenhouse emissions. A single Bitcoin transaction releases 200kg of CO2, the equivalent of traveling 500 miles in a typical gasoline vehicle. The higher the Bitcoin price is, the greater the demand in the market, and the more energy is used, ultimately worsening the global situation. Annually, the electricity produced, supplied, and distributed on Bitcoin is represented in the table below.
The demand for high-tech computers has increased, prompting many engineers to manufacture more advanced machines in a short period continuously. Amid rising tensions, Elon Musk has withdrawn Bitcoin as the payment option for Tesla vehicles, believing that it is unethical to benefit from non-environmentally sustainable projects.
Energy Sources For Bitcoin Mining And E-Waste
The energy sources used in Bitcoin are Geothermal, Solar, Nuclear, Fossil fuel, Coal, Oil, Hydroelectric, others.
According to a 2020 study by the University of Cambridge, 76 percent of crypto miners rely on some form of renewable energy to fuel their operations. However, there is still a need for improvement, as renewables account for 39 percent of overall energy demand in crypto mining.
Gold mining still remains one of the world's most devastating industries. It has the potential to destroy communities, pollute the water supply, endanger workers, and severely damage delicate ecosystems. It damages the environment, water, and land with mercury and cyanide, jeopardizing people's and habitats' wellbeing. The production of gold for a single wedding ring produces 20 tons of waste.
We restate the question, is Bitcoin really the problem? Eventually, Bitcoin mining can be fully moved to alternative energy sources. What about gold, though?
Aside from excessive energy demand, Bitcoin mining has been blamed for e-waste production. According to a Digiconomist report, Bitcoin mining generates between eight and twelve thousand tons of electronic waste each year, and when machinery or devices are discarded unethically, these toxic materials can damage the ecosystem.
However, the issue here is with the individuals who engage in this immoral conduct. There are safe and devoted ways to dispose of e-waste, such as donating it to approved e-waste recyclers, selling the discarded parts, etc.
Bitcoin used 232 megawatts of electricity in 2017, according to the Global Cryptocurrency Benchmarking Report, with China consuming half of the power reported here. As previously stated in this article, China is heavily reliant on fossil fuels, especially coal.
According to dozens of sources, China has the highest CO2 emissions in the world, emitting more than 10 billion metric tons in 2019 and almost the same amount in 2018. As a consequence, is it Bitcoin mining that is the issue, or the unjustified activities of not understanding the environmental concerns?
The diagrammatic depiction of carbon intensity and power consumption with weighted average shown below depicts a quantitative analysis of bitcoin's environmental impacts, mainly attributed to China.
Renewable Energy And Bitcoin
Foundry, one of North America's largest crypto mining firms, is led by Mike Colyer. According to him, the bitcoin mining network would use green energy sources, allowing the oversupply of resources to be properly managed. Recently, China also released a public directive to make the most surplus power production arising out of renewable sources.
Mining demands electricity 24 hours a day, which is difficult to come by from renewable sources. One problem that green energy can't fix is bitcoin's carbon footprints as the machines hit the end of their useful lives and become e-waste, which pollutes the environment.
The impetus seems to be in place, and with shifting demographics, clean energy sources will eventually replace coal and fossil fuels, but there are still bottlenecks to overcome.
Major Challenges Of Using Renewable Energy For Mining
Aiming For Sustainable Future?
- Renewable electricity isn't reliable in terms of energy efficiency. Solar electricity, for example, receives a surplus of energy during the day but none at night. Unfortunately, mining technology is not yet mature enough to store vast amounts of energy during the day and discharge it at night on a large scale.
- Many clean energy stations are in rural areas with enough space to install solar panels, hydroelectric dams, and wind turbines. Once again, storage capacity isn't mature enough to make it economically viable to store and transfer electricity from rural areas to urban areas, where most energy demand is concentrated.
Bitcoin advocates firmly believe that it presents more benefits to users than any other method of payment. It has a low transaction cost compared to other modes of trade, but it has a significant environmental effect. As the most important and vital sources of life, such as food, water, and electricity, deteriorate, it creates enormous problems for humans and other living things on the earth.
Despite bitcoin's negative environmental effects, it is expected to develop and flourish in the coming years with more scalable strategies to preserve the ecosystem with greener and eco-friendly principles.
Since many believe that getting their hands on bitcoin will provide them with far more beneficial benefits, they are unconcerned about using energy machines that have used far too much electricity over the years, causing climatic changes in the environment. Is Bitcoin mining long-term viable, taking into account various theories and beliefs?
Green technology bitcoin mining and energy-optimized blockchain platforms seem to be the potential cornerstone of Bitcoin mining due to higher sustainability standards, reduced prices, lower environmental effects, and broad acceptance.
It is just a matter of time until these sustainability initiatives surpass the current systems, laying the groundwork for a sustainable and decentralized financial framework. Read our next article to learn more about renewable energy for mining, how to eliminate bottlenecks, and how sustainable mining operations will disrupt the global economy.
Constantin Kogan is a co-founder of BullPerks.
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