Bitcoin has long held the status of number one cryptocurrency. Since its launch in 2009, individual investors and big corporations alike have stocked up on the digital token. However, the world has since awoken to the sustainability and energy consumption issues around the mining and trading process. Lately, even Elon Musk, one of the most notable bitcoin advocates, announced Tesla to stop accepting bitcoin as a payment method for their vehicles, which was only three months after it was initially announced to become available. He defended the sharp turn in strategy on Twitter, being “concerned about rapidly increasing use of fossil fuels for bitcoin mining and transactions, especially coal, which has the worst emissions of any fuel.”
To put things into perspective, a single bitcoin transaction consumes an average of 910 kilowatt-hours (kWh) of energy. On the other hand, 100.000 VISA transactions do not reach a consumption of more than 150 kWh. Digiconomist states that bitcoin’s annual energy usage surpasses the consumption of entire countries, such as the Netherlands, and its carbon footprint is comparable to Portugal’s. Furthermore, one bitcoin transaction’s carbon footprint equals 92.901 hours of watching YouTube. Hence, it is not surprising that, according to Bill Gates, “Bitcoin uses more electricity per transaction than any other method known to mankind, and so it’s not a great climate thing.”
The fundamental problem with bitcoin mining, referring to creating new bitcoins and verifying transactions, is the energy-intensive process that requires high-powered computers to solve complex calculations. Crypto miners compete in speed to solve cryptographic puzzles to register the latest “block” of bitcoin transactions. The more bitcoins produced, the more complex the puzzles become to solve, which secures a stable block production rate. More and more powerful computers and energy usage equal more puzzles solved, leading to the most significant barrier for bitcoin mining becoming electricity prices. Therefore, one can say that the technology is based on a principle that in the lottery of bitcoin mining, the one that wastes the most electricity in unnecessary work is most likely to win.
Every company these days has to look at its environmental impact and adjust its practices to correspond to the ever-increasing sustainability standards and consumer requirements. Therefore, it is possible that investors becoming more environmentally conscious poses a threat to bitcoin’s future. Dr. Larisa Yarovaya, a lecturer at Southampton University, thinks that “Bitcoin could be the first inefficient version of a disruptive technology. It should die for the common good of the planet and be replaced by a new model. It consumes more electricity than a country. All the rest is detail.” Other more or less serious intentions in mind created cryptocurrencies, such as ethereum, ripple, and dogecoin, have been catching up in trading volumes, tether even surpassing bitcoin. However, these coins are energy-intensive too, yet bitcoin is still taking the lead.
As energy consumption is not a fault or a bug in the crypto mining process but more of a prominent feature, the method of electricity production is crucial. However, it is not easy to calculate the actual proportion of fossil fuels and renewable sources in the energy generation for bitcoin. Yet, most bitcoin mining takes place in countries heavily relying on coal use, such as China, which is in charge of 70 percent of the mining. Some supporters claim that bitcoin’s need for renewable energy sources could speed up the global process of shifting from fossil fuels to renewable energy sources. Last month in China, the Beijing Municipal Bureau of Economy and Information Technology sent an “emergency notice” to data centers in the area to report if they were taking part in bitcoin or any crypto mining. They are also required to register power consumption on operations, which is likely to lead to some new regulations. As bitcoin and its energy usage are increasingly becoming known by companies, governments, and the general public, more rulings and discussions on the technology and cryptocurrencies in general are expected.
Despite all concerns and sustainability goals, the value and increasing interest in cryptocurrencies companies still look for investments, partnerships, and side ventures in crypto. For example, Microsoft has accepted bitcoin as payment for digital content in its Windows and Xbox stores since 2014. PayPal has let US users pay with bitcoin, ethereum, and litecoin since March. Investment banks have jumped on board, too; Goldman Sachs has brought back bitcoin derivates trading, Morgan Stanley is planning on client access to bitcoin funds, and Citigroup is exploring what their role could be in the crypto landscape. The controversy is inevitable, but many believe bitcoin’s carbon footprint will change. PayPal has stated that “Not only are we assessing the climate impact of cryptocurrency, which is concentrated on bitcoin, but also the entire industry is evolving in the assessment and measurement standards of the potential environmental impacts and more energy-efficient protocols are emerging.”
Before the energy generation for bitcoin and other crypto mining has largely shifted away from non-renewable sources, there should not be any increase in interest to make these coins a more important player in the payment industry than they currently are. In the current race against the worsening effects of climate change, we cannot be shifting into mainstream use of new technologies that are even more harmful to the environment than the established ones. Cryptocurrencies pose many opportunities and benefits – decentralization, efficiency, and security. Yet, we have a moral obligation to pass at least a somewhat healthy planet to future generations that we cannot forget in the hype of new and possibly revolutionary technologies.