A recent tweet by Elon Musk has threatened Bitcoin’s rising fame and price!
“We are concerned about rapidly increasing use of fossil fuels for Bitcoin mining and transactions, especially coals which has the worst emission of any fuel.”
While the value of this digital currency is undoubtedly promising, the energy it consumes (to power its network) is a matter of concern.
According to an estimation done by the University of Cambridge, every year Bitcoin uses 120 terawatt-hours of electricity. If you cannot fathom how massive this energy consumption is, then take a look at the following graph.
Note: Terawatt-hours (TWh) is the electricity consumed at a rate of trillion watts per hour.
According to this graph by Statista, in a year Bitcoin ends up consuming more electricity than some of the nations. That is the horrid reality!
But, does Bitcoin energy consumption affect the environment?
How are these two things related?
In order to understand this, you need to know what cryptocurrency mining is and how it impacts the environment!
So, let us dig deep into the matter!
The process of developing new Bitcoins and adding them to the blockchain ledger is called Bitcoin mining and people carrying out the process of mining are called miners. Bitcoin mining is necessary to monitor, verify and validate the transactions taking place.
For mining Bitcoins, the miners use sophisticated computers to solve a complex set of mathematical equations and puzzles. Any miner who finds the solution first gets paid (and transaction fees as well) in Bitcoin without having to spend a penny from his/her side. This implies the miners are rewarded for being auditors.
Note: In 2020, for mining one block correctly, miners were paid 6.25 Bitcoins, which is a pretty decent reward! To know more about how much a miner earns, you can click here.
The question that must be tickling your brain is how does this mining process lead to environmental harm?
How is Bitcoin energy consumption per transaction a concern for environmentalists?
Let us find out!
You must be aware of the fact that Bitcoin is not regulated by any legitimate authority. But, the transaction done between investors does need verification.
Do you agree?
Therefore, to make the playing field honest, miners audit as well as process the transactions and the blockchain keeps getting updated.
As mentioned above, the mining process involves solving complex mathematical equations and miners use large computers to do so. These large computers (or supercomputers) consume a significant amount of electricity that majorly gets produced from fossil fuels!
Now many of you would be wondering, electricity consumption by computers is a common phenomenon. So how can it pose such a pronounced threat to the environment?
The following explanation will help you to put things into perspective!
The Bitcoin network revolves around the verification and processing of each transaction that is taking place. So, to maintain the smooth working of this Bitcoin network, one block gets produced every 10 minutes. As a new block is produced, miners start the chase to solve the arbitrary mathematical equations with the hope to be the first to provide the solution.
Miners around the globe make more than 150 quintillion attempts every second (of the day) to solve such equations.
All these attempts are made using large computers that power energy from non-renewable sources like coal and natural gas. So now you can fathom how harmful the energy consumption of this level would be!
The Bitcoin price rise has acted as an added issue in the entire fuss!
This is because as the Bitcoin price was breaking records, it encouraged the miners to actively participate in the mining process which pushed the energy consumption even more.
Obviously, the miners had their eyes on the incentive which is paid in Bitcoins!
According to the graph, hydroelectric power is used as a source of energy by 62% of the miners yet coal, natural gas and oil power are used by many. These three non-renewable energy sources together are causing the maximum damage to mother nature.
A platform called Digiconomist carried out a study to analyse the energy consumed by Bitcoin and Ethereum. Here are the important takeaways from the released data.
The graph represents how energy consumed by Bitcoin increased every year from 2017 to the first half of 2021.
According to Digiconomist, Bitcoin energy consumption per transaction stands to be 90.19 kWh (Kilowatt hour) which is comparable to the power consumed by a single house in the US for roughly 41 days.
Also, the carbon footprint and electronic waste production per Bitcoin transaction is 570.04 kg and 111.50 grams respectively.
The graph clearly shows that between 2018 and the first half of 2020 Ethereum's energy consumption was low but it took a sudden jump from the second half of 2020.
According to Digiconomist, Ethereum miners consume 44.49 TWh of energy every year. Also, Ethereum’s energy consumption per transaction stands at 90.19 kWh which is comparable to the power consumed by a single house in America for roughly 3 days.
The carbon footprint per Ethereum transaction is 42.84 kg.
In the beginning, you looked at Elon Musk’s tweet where he reversed the decision to accept Bitcoin as payment owing to environmental concerns
But, what about other cryptocurrencies?
Are they equally harmful?
Do they consume similar energy as Bitcoin?
Let us find out!
The current sensation of the crypto world, Dogecoin’s energy consumption per transaction is 0.12 kWh. On the other hand, Litecoin which is often called silver consumes 18.522 kWh per transaction.
So, among all these, Dogecoin has emerged as the most energy-efficient cryptocurrency. Not only this, a few days ago, Ethereum’s inventor also pledged to reduce its energy consumption per transaction.
“Ethereum mining is a huge waste of resources, even if you don’t believe that pollution and carbon dioxide is an issue. There are real consumers – real people – whose need for electricity is being displaced by this stuff.”
To conclude, I will say that Bitcoin might have great potential but if the mining aspect remained unchecked, the results would be catastrophic for the environment.
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