From Bitcoin to Bitcarbon: The Environmental Cost of Cryptocurrency Mining

The world of cryptocurrency is one that is constantly evolving, with Bitcoin at the forefront of this exciting industry. However, paralleling the meteoric rise of Bitcoin and other cryptocurrencies, is the growing awareness about their environmental impact. A new term has even been coined that is on everyone’s lips these days – “Bitcarbon”. Though not officially recognized, it alludes to the carbon emissions produced in the mining of Bitcoin. This emergent environmental cost of cryptocurrency mining has sparked questions about sustainability and responsible digital consumerism.

The Process of Mining and Its Energy Consumption

Cryptocurrency mining involves two key processes; adding transactions to the blockchain (securing and verifying) and releasing new currency. The mining computers essentially solve complex computational math problems, the frequency of which is directly proportional to the number of miners competing to solve it. These mind-boggling equations require serious computational firepower, and by extension, a significant amount of electricity1.

For context, research conducted by the University of Cambridge suggests that the Bitcoin network consumes more energy annually than the entirety of Argentina or the Netherlands2. With the increasing popularity of cryptocurrencies, fueled by substantial investor interest, this carbon footprint is only projected to grow. This sets the stage for considerable environmental implications if this course continues unchecked.

Bitcarbon: A Measure of Carbon Footprint

Bitcarbon – a term seemingly coined to mirror Bitcoin – refers to the measure of carbon emissions as an unintended consequence of cryptocurrency mining. An estimation by DigiEconomist suggests that every individual Bitcoin transaction has a footprint of around 359.04 kgCO2, equating to over 700,000 VISA transactions or the consumption of almost 60,000 hours of watching YouTube3.

The Debate on Renewable Energy

While some argue that the problem could be solved with renewable energy since many mining farms are located near renewable energy sources or where electricity is cheap4, this is not a universally accepted solution. According to a study by CoinShares, as of June 2019, Bitcoin mining derives approximately 74.1% of its electricity from renewable resources5. Yet, its carbon emissions are still substantial.

However, a significant challenge lies in the nature of renewable energy itself. It is inconsistent, dependent on variable factors like sunlight, wind speeds or rainfall. Additionally, the demand for energy in cryptocurrency mining is continuous and not aligned with the supply patterns of renewable energy.

Possible Solutions

Addressing the mounting concerns, Ethereum, the second largest cryptocurrency, plans to roll out Ethereum 2.0, a new platform that intends to reduce its energy consumption by 99%6. The platform will abandon the current proof-of-work system (which Bitcoin uses) for a proof-of-stake system which requires less computational power, and thus, less energy.

There are also efforts to create ‘green’ cryptocurrencies. Chia, for example, uses a proof-of-space system which relies on storage space instead of processing power, reducing energy demands significantly7.

On the regulatory front, countries such as Iran and China, which have a sizeable chunk of the Bitcoin mining market (due to cheap electricity), have initiated crackdowns on the miners, citing environmental concerns and energy use8.

In Conclusion

While the persistent rise of the cryptocurrency industry ignites excitement and optimism for a decentralized financial future, the environmental footprint left in its shadow cannot be ignored. There is an urgent need for creative solutions and urgent action from businesses, regulators, and consumers. As we transition from Bitcoin’s golden age to the less glittering, but more conscientious era of Bitcarbon, the cryptocurrency industry finds itself at a critical crossroads between innovation and sustainability.

Sources

1. https://cbeci.org/
2. https://www.bbc.com/news/science-environment-56215787
3. https://digiconomist.net/bitcoin-energy-consumption
4. https://www.coindesk.com/markets/2021/07/05/majority-of-bitcoin-mining-powered-by-renewable-energy-says-report/
5. https://coinshares.com/research/bitcoin-mining-network-june-2019
6. https://ethereum.org/en/eth2/
7. https://www.chia.net/2021/04/21/what-is-farming-chia.html
8. https://www.bbc.co.uk/news/technology-57273904