Updated: Jun 15
Bitcoin took a massive hit ever since Tesla CEO Elon Musk said on Twitter that the electric-car business had discontinued bitcoin as a payment method, citing worries about the cryptocurrency's association with increased fossil fuel consumption. Since then, the new flashpoint for Bitcoin is energy use. While some criticize it as an energy guzzler, proponents point out that it is less energy-intensive than the current global economy.
Bitcoin is killing the planet? Think again
The Bitcoin network is based on computers solving problems, which requires electricity. According to the University of Cambridge, bitcoin mining consumes approximately 130 terawatt-hours of electricity every year. To put it in context, the United States consumes almost 4,000 terawatt-hours of electricity each year.
Although it is straightforward to define and calculate Bitcoin's energy consumption, this is not the case for the industries with which Bitcoin is frequently compared. Where does the gold industry's environmental impact end? What about the financial system's environmental impact? Is it inclusive of all bank buildings, ATMs, plastic, and metal used in the production of banknotes, coins, and cards?
Whether Bitcoin’s energy consumption is harming the environment or not, the negative connotations associated with its energy usages have concerned investors about the crypto industry’s ethical and environmental responsibilities. Past reports that highlight Bitcoin consuming more energy than entire nations have often failed to present the entire image.
Much of bitcoin mining is conducted using renewable energy; the amount varies between 39% and 73% depending on the source, which is significantly greater than the amount of renewable energy in the US power system.
Thus, even if the predictions are conservative, bitcoin is significantly more energy-conscious than the ordinary industry. Additionally, most miners consume energy that would otherwise be squandered in places where it cannot be exported to neighboring metropolitan infrastructure.
For instance, bitcoin miners in rural China repurpose hydroelectric energy that would otherwise be squandered due to low local energy demand and the impossibility to move the excess energy to an urban power grid. In simple terms, Bitcoin mining incentivizes excess electricity. On a larger scale, this is a win for both miners and power manufacturers.
How Bitcoin sparked the Green Crypto revolution
However, some good did come out of the recent clutter, as it seems to have fueled the transition to a greener crypto industry. Several new blockchain projects are solely focusing on ways to further mitigate environmental impact.
Over the past weeks, we have seen one of Canada's Bitcoin exchange-traded fund issuers, Ninepoint Partners LP, announce a partnership with carbon offsetting service provider CarbonX to devote a portion of its management fees to carbon credits used to offset the environmental impact of mining BTC.
We've seen the formation of a contentious Bitcoin Mining Council with the goal of enhancing the cryptocurrency's sustainability and promoting energy transparency while encouraging miners to employ renewable energy sources. We saw the rise of Chia, a blockchain network based on farming that generates blocks using your hard disk space rather than your computational power.
The move to the Proof of Stake (PoS) consensus is likely the most widely claimed answer to all the environmental woes, with Ethereum developer Vitalik Buterin claiming that it will reduce energy consumption by about 99 percent and make Ethereum 2.0 more environmentally friendly than Bitcoin. Although it is unknown whether the flagship cryptocurrency would abandon the Proof of Work consensus method, the current debate demonstrated how efficient cryptocurrencies like Bitcoin are in comparison to the primitive technology in use today.
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