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Bitcoin and Renewables: How Damaging Is Cryptocurrency Mining?
- Since its creation in 2009, Bitcoin has been at the forefront of a growing industry. Experts predict the cryptocurrency market to climb to $4.94 billion by 2030, triple the 2020 figure. Mining the remaining Bitcoin requires powerful, high-tech computer systems. These systems demand vast amounts of electricity, increasing costs and environmental impact.
- Bitcoin mining uses a computer to solve complex maths problems – and the miners are rewarded in Bitcoin. Experts state that the energy required to maintain these Bitcoin systems is equivalent to the energy needed to power Argentina.
- Unfortunately, Bitcoin miners commonly use cheap fossil fuels to power their equipment, emitting dangerous emissions into the atmosphere. Researchers estimate that 65% of miners were based in China; however, since their government is cracking down on crypto miners, many are relocating to places such as Canada.
- Renewable energy has the potential to curb some of these emissions, especially as the price decreases. If miners move to Canada, a leader in hydropower, it may positively impact the industry. However, some energy experts claim that switching to clean energy will result in crypto companies taking a financial hit, deeming it an unlikely option.
The global cryptocurrency industry is set to reach $4.94 billion by 2030, more than triple its 2020 figure.
Bitcoin has demanded the attention of investors, energy experts, and conservationists alike, but how has this digital currency impacted the physical world?
Despite its short history, the global cryptocurrency industry is set to reach $4.94 billion by 2030, more than triple its 2020 figure. Bitcoin quickly became one of the top digital currencies since its creation in 2009. Although its creators are relatively unknown, they only produced a limited number of Bitcoins to mine – 21 million to be exact. With approximately 18.5 million already mined, it requires much more computer power to mine the remaining few. The issue this presents is regarding the energy source bitcoin miners use and whether it will have a lasting impact on the environment.
This article answers these questions and discusses the future of cryptocurrency mining and whether renewable energy may play a role.
What Is Bitcoin Mining?
A computer must solve a range of complex math problems to be rewarded in Bitcoin – this is called mining.
Understanding what Bitcoin is and the process of mining will shine a light on the potential environmental impact. Since the unknown creators made Bitcoin in 2009, it quickly became something of a profitable investment. According to Forbes, a $1000 investment in Bitcoin when it first became publicly available would see you £36.7 million richer just a few years later. However, despite the financial prospects, this digital currency may be destroying the very future it’s so keen to be a part of.
In short, Bitcoin is a decentralized digital currency that does not have a bank or administration. A computer must solve a range of complex math problems to be rewarded in Bitcoin – this is called mining. In the early years of Bitcoin, it was possible to mine using a single home computer, essentially giving almost anyone access to its fortune. However, miners have already unlocked 18.5m Bitcoins, so it is no longer possible for an average computer to do the job; instead, mining requires high-tech equipment with immense processing power. Consequently, specialist computer hardware needs a tremendous amount of electricity to run.
How Is Bitcoin Impacting Climate Change?
Bitcoin emissions may produce around 9 million metric tonnes of CO2, almost equal to the emissions for the entire city of London.
The computer power needed to maintain the Bitcoin system is equivalent to the energy demand in Argentina. With a mining system varying from a single computer to a large warehouse operating 24 hours a day, it’s easy to imagine what this means for the cryptocurrency’s environmental footprint. A UK study discovered that the computer power required to mine Bitcoin quadrupled in 2019, compared with 2018. Their findings also found that prices within utility markets were affected.
Because mining requires a colossal amount of electricity, miners gravitate to the cheapest form of energy, typically fossil fuels. As cryptocurrency farms flock to these areas, local electricity grids are buckling under immense pressure. This is what happened in Abkhazia in the Northwestern territory of Georgia. Over 150 crypto mining farms popped up in a few short years, and it proved too much for the grid. They soon had rolling blackouts to prevent damage to the grid from unexpected power surges and confiscated some equipment.
At one point, there were approximately 65% of miners in China, a country that primarily depends on coal energy. In fact, Bitcoin emissions may produce around 9 million metric tonnes of CO2, almost equal to the emissions for the entire city of London. One study highlighted that the carbon footprint of an average Bitcoin transaction was 360kg, compared to Visa, which is approximately half a gram. This data shows the average carbon footprint per transaction is 800,000 times higher than Visa.
Despite the considerable Bitcoin market in China, its future is tentative. Over the years, China has discussed banning cryptocurrencies, like Bitcoin. It is cracking down on cryptocurrency mining, forcing people to relocate for accessible energy. Black Rock Petroleum announced its potential relocation to Alberta, moving its share of Bitcoin mining from China to one of Canada’s oil-rich provinces.
Alberta’s known for its large and cheap natural gas industry. Bitcoin mining will only increase the dependence on fossil fuels and ramp up greenhouse gas emissions. This is an enormous setback for the climate change movement and may devastate the planet’s future.
Even Elon Musk spoke up about the environmental impact of cryptocurrency and claimed it could not come at the cost of the environment. The CEO of Tesla went on to cancel plans to accept Bitcoin for his electric cars.
As crypto prices increase, companies invest more money in mining resources. Crypto experts predict that the industry is likely to double in the next year, along with the electricity demand. Therefore, it’s more important than ever to consider the damaging impact of cryptocurrency before it pollutes the atmosphere further.
Can Cryptocurrency Go Green?
A 2020 report from the International Energy Agency (IEA) states that solar power is now the cheapest electricity in history.
There is considerable debate regarding the viability of crypto going green. Some experts suggest that businesses would take a financial hit for renewable energy to power crypto mining. With renewable energy typically being more expensive, it would cost more to generate the appropriate amount of energy and keep their machines running 24/7. The motivation for these individual companies is getting the greatest return on investment (ROI), but the margins are drastically narrower with clean energy.
As miners are looking for the cheapest power, the prospect of using green energy may be more promising than previously thought. A 2020 report from the International Energy Agency (IEA) states that solar power is now the cheapest electricity in history. As demand for renewable energy increases, the price has naturally fallen. In the last decade, the cost of solar photovoltaic (PV) equipment dropped by 82%.
Some experts believe “Bitcoin is the key to an abundant clean energy future” because it will stimulate investments in renewable energy and generate more energy for the grid. In 2020, Canada generated over half its energy capacity from hydropower, producing 440 billion kilowatt-hours (kWh) of renewable power. Therefore, it could be a safer place to power these systems. Despite this, Canada is a massive player in the hydroelectricity sector, although wind and solar power industries are growing the fastest.
While it may not be an overnight solution, with renewable power prices decreasing yearly, it seems probable that miners may switch to cleaner energy options. That said, the oil and gas industries are vast and challenging to compete alongside. Bitcoin mining is proving a significant hurdle to realizing our global climate goals.
Bitcoin isn’t the only digital currency, though. In fact, not all cryptocurrencies have a significant impact on the environment, and many do not use mining at all. The blockchain platform, Cardano, claims to be 4 million times more energy-efficient than Bitcoin – highlighting the potential for cryptocurrency to use clean energy.
Bitcoin emissions are a crucial concern for the future of the crypto industry and the planet. As mining requires masses of power, this digital currency increases the demand for fossil fuels like coal and gas. Despite its dependence on cheap fossil fuels, there is hope that cryptocurrency miners will switch to renewables as the clean energy market expands.
Investments in sustainable energy, like wind and solar, are crucial to encourage industries like crypto to turn to environmental energy production. A switch to cleaner energy could help push the transition into a clean energy future.
Frequently Asked Questions (FAQs)
What is Bitcoin?
Bitcoin is a decentralized digital currency mined using specialized computers. These systems run day and night to solve complex maths problems, after which the miners are rewarded with Bitcoin. A standard computer could mine Bitcoin in the early days; however, approximately 18.5 million of 21 million Bitcoins have been unlocked, so mining now requires immense computing power.
How does Bitcoin contribute to climate change?
The computers required to mine Bitcoin run 24 hours a day and use vast amounts of electricity. Research shows Bitcoin mining requires as much energy as the entire country of Argentina. This equipment and electricity are expensive, so businesses use the cheapest energy source to make the greatest return on investment (ROI). Unfortunately, the cheapest source of electricity tends to be fossil fuels, a large industry with an even larger energy capacity.
Over the years, China has been home to a large portion of crypto mining farms due to its massive coal industry. Using this cheap fuel increases the demand for ‘dirty’ energy and greenhouse gas emissions. In fact, Bitcoin emissions may produce approximately 9 million metric tonnes of CO2, almost equal to the emissions for the entire city of London. Currently, the cryptocurrency market is set to rise, causing concern for the future of the environment.
How can renewable energy be used for Bitcoin mining?
According to the International Energy Agency (IEA), renewable energy is the key to reaching climate goals. Specifically, the IEA highlights that solar power will be at the forefront of this movement and dominate energy production by 2050. For clean energy to become the primary power source, there must be wider public acceptance of green projects and continued investments into safer, cleaner power. Fortunately, investments are rising as the renewable industry grew by 45% in 2020 alone – the most significant increase since 1999. Due to the global lockdown, fossil fuel demand dropped dramatically, and many consumers switched to cleaner energy.
What’s more, the IEA published a report which states solar power is the cheapest energy source in history, opening up the possibility of switching crypto mining to renewables. If this becomes a possibility, greenhouse gas emissions will decrease, renewable investments will rise, and the industry will help produce clean energy for the national grid. In short, it would help transition the world to a clean energy future.
What are the problems with cryptocurrency?
The issue that the cryptocurrency industry currently faces is its emissions. To get the best ROI, miners must use the cheapest electricity, coal and natural gas. Bitcoin mining, for example, uses so much energy that if too many farms rely on one grid, the place may experience energy shortages. This happened in Georgia when over 150 crypto mining farms popped up over several years; the grid couldn’t power such energy-intensive systems. The country was forced to operate rolling blackouts to prevent an unexpected energy surge that may damage the grid. The energy demand that Bitcoin creates is harming the environment, increasing greenhouse gases and polluting the atmosphere.
How much energy does it take to mine Bitcoin?
Research estimates that the power needed to maintain Bitcoin’s system is equivalent to the energy required to power Argentina. Miners move around to get the cheapest energy prices, but a considerable amount is based in China, where coal is abundant. However, this is likely to have changed as China cracks down on cryptocurrency mining, causing them to relocate.
Due to the high energy demand, it seems logical to switch to renewables to reduce the environmental impact. However, safeguarding the environment isn’t the sole motivation of these independent companies. For them to change to clean energy, they would be reducing their ROI, lowering their income. That said, some experts claim that transitioning to renewable energy is unlikely due to this financial cut. Nevertheless, if renewable energy prices continue to drop as they have, clean power will become even more affordable and accessible to the market.