If you have ever delved into the fascinating world of crypto twitter, you would have read that Bitcoin is killing the planet. When I first read this, I didn’t know what to make of it. After some investigation, it came into focus that it isn’t so much the bitcoin as it is the bitcoin mining process.
So, what is Bitcoin Mining?
Throw away the image in your head of being deep underground with a pickaxe and poor lighting. Bitcoin mining is done in true 21st-century style – on a computer. Bitcoin mining is a peer-to-peer computer process used to secure and verify bitcoin transactions. Mining adds transaction data to a pre-existing record of past transactions. Each group of transactions is called a block. Blocks are secured by Bitcoin miners and build on top of each other forming a chain. This ledger of past transactions is called the blockchain. Whilst mining serves the purpose of verifying transactions, it also introduces new bitcoins into the system. Miners are paid transaction fees as well as a subsidy of newly created coins, called block rewards. This process serves a dual purpose in the sense that new bitcoins are introduced into the system consistently and there is transaction security provided.
How does this affect the environment?
The mining process is resource intensive. People have been quite ambivalent in their view of the impacts of digital mining. Although most of the electricity used is sourced from coal, mining operations usually do not release carbon emissions themselves. To understand why people are up in arms about the energy consumption crisis, let me illustrate just how much electricity we are using for mining BTC: The Bitcoin network currently consumes about 24 TWh of electricity per year. To put that into perspective, the entire country of Ireland has an average electricity consumption of around 24 TWh annually. Over the past year, the estimated amount of TWh that the Bitcoin network consumed increased by 413.37%. When compared to countries like the Czech Republic, the Bitcoin network uses 102.3%of the entire electricity consumed by the country per year.
Despite the enormous amounts of electricity being used, consumption is not the biggest concern regarding the mining process. The network is mostly powered by coal-fired power plants in China. Coal-based electricity is much cheaper here and therefore an ideal environment. Despite there being a conservation emission factor, Bitcoin’s growing popularity does mean a significant carbon footprint.
What about the banking system?
Whilst it is undoubtedly true that Bitcoin Mining is resource intensive in its nature, it is perhaps what we would call the lesser of two evils.
The banking system makes use of massive amounts of electricity on a daily basis. The bulk of this electricity being coal-based electricity. A study on the banking system and their electricity usage yielded a conservative annual usage amount of just under 100 TWh. By conservative amount, I mean that the only factors considered are servers, ATM’s and branch usage. With BTC mining being less than a third of this number, we see why it is a grey area for many people.
Sustainability and the future:
We’ve started to see many Bitcoin miners moving towards renewable energy sources to lessen their negative impact on the planet. Alternatives such as hydroelectric and geothermal power have become a favoured route for many miners.
If the Bitcoin network keeps growing at its current rate, the need for renewable energy will be imperative. As the popularity and adoption increases, so does usage and the need for mining.
Bitcoin mining may be heavy hitting with its energy requirements but it is still more “planet-friendly” than our traditional banking system. It also allows us to transact freely in a decentralised, secure and peer to peer manner So, be your own bank with Bitcoin and do your part to help the environment!.