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June 14, 2021
Cryptocurrency has recently experienced a meteoric rise in awareness and value versus traditional mediums of exchange. As far back as 2009, cryptocurrency was growing in awareness in some form or other. It truly came into its own around that time when Satoshi Nakamoto or a group of people collectively operating under that name ushered in an age of new blockchain technology and decentralized currency, which he dubbed “bitcoin.”
Bitcoin is usually “mined” via blockchain technology, with the latter a decentralized ledger that records all peer-to-peer transactions. Participants confirm their transactions using this technology without the usual requirement of a central clearing authority. To mine, produce and work with Bitcoin requires complex math problem-solving, which entails a lot of computers being added to a network and working as a “mesh.” These computers solve problems that might take hours or days to complete.
Bitcoin recently entered the popular discourse when industry titans began speaking out in support and opposition of the digital currency. Elon Musk tweeted that his company would accept Bitcoin as a form of payment for his cars, a statement he retracted days later citing environmental concerns and high energy use required to produce bitcoin. On the other hand, Twitter and Square CEO Jack Dorsey has been vocal in his optimism that future forms of cryptocurrency including Bitcoin will rely on renewable sources of energy and less resource-intensive to produce.
Bitcoin's strikingly high carbon footprint has drawn skepticism from other high-profile detractors. Bill Gates told The New York Times that “Bitcoin uses more electricity per transaction than any other method known to mankind,” and added that “it’s not a great climate thing.” Each Bitcoin transaction requires 300 kilograms of carbon dioxide, which is the equivalent of about 750,000 Visa swipes according to Dutch Central Bank data scientist Alex de Vries.
Every cryptocurrency functions from a block, which is a public and open ledger to ensure transparency and requires additional storage space. Warehouses of Bitcoin mining rigs run 24/7 and consume vast amounts of electricity. Herein lies the catch. According to Digiconomist, “a single Bitcoin transaction uses roughly 707.6 kilowatt-hours of electrical energy – equivalent to the power consumed by an average U.S. household over 24 days.”
If you calculate for one year, Bitcoin production consumes as much as electricity as a small country like Chile or Austria. This is compounded with the realization that most Bitcoin networks are located in China, which is heavily dependent on coal for most of its energy use. Also, mining must be performed with only the best equipment, and machines mining coins usually become obsolete after 18 months of use, creating electronic waste.
There are some purportedly greener alternatives to Bitcoin’s resource-intensive production model. Ethereum is trying to move away from a proof of work model or PoW model to a proof of stake or PoS model, which will drastically reduce the energy it uses. The “staking” technology, loosely defined as devoting a certain amount of ether to become a validator on the network, is still some time away from fruition, but Ethereum has pledged to move away from its core system of computational mining, the main cause of machines that gobble exponential amounts of power.
In the search for greener cryptocurrencies, the most noise has been caused by a new one dubbed Chia, developed by Bram Cohen from the U.S. Unlike Bitcoin, Chia requires no processing and instead relies on generic reusable computer hard disk space as its main criterion. The Chia network will work on farming rather than mining, with farming loosely defined as creating a “plot” of files that take up space on a hard drive.
Canada-based Neptune Digital Assets is working on greener cryptocurrency by using renewable sources of clean energy. To that end, the company signed a March agreement with Pure Digital Power, a Bitcoin mining company with an emphasis on clean sustainable energy, and announced it had commenced mining in the Alberta region in April.
Clearly, cryptocurrency companies’ focus should be finding alternatives to the main networks of miners based out of China and other countries that depend on fossil fuel-based energy solutions. Until then, it would be wise to branch out, and look for alternatives but hold on to your bitcoins, just in case!
Tasnim Ahmed is a content writer at Escalon Business Services who enjoys writing on a multitude of subjects that include finops, peopleops, risk management, entrepreneurship, VC and startup culture. Based in Delhi NCR, she previously contributed to ANI, Qatar Tribune, Marhaba, Havas Worldwide, and curated content for top-notch brands in the PR sphere. On weekends, she loves to explore the city on a motorcycle and binge watch new OTT releases with a plateful of piping hot dumplings!
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