For those that have been paying attention, there’s a lot of fuss over the earth’s rising temperatures. No stone has yet to be unturned as virtually every sector of the economy has been heavily scrutinized for its role in the painstaking process of fixing a global crisis. So what then exactly is all of the fuss over Bitcoin and its place in the greenhouse gas realm?
According to its website, it is an innovative payment network designed to exchange currency via digital means. The value of Bitcoin significantly increased by $12,000 from the start of 2017 to the end of the year. Not only has the currency caught onto a trend, but that trend almost certainly increases in economic gain as investors and consumers alike want to cash in on its meteoric rise.
Despite its newfound surge in popularity, Bitcoin has long faced criticism for its contributions to global warming. The rise of cryptocurrency has faced stern criticism by industry experts and also pure fascination among mainstream investors. With estimates of 300,000 transactions per day, one can easily multiply the energy output to this number and ultimately come up with a number so high that some households equal it with their energy use in a week’s time. Another concern is that the cryptocurrency has yet to become widely used and therefore for the amount of energy it uses to transact, it does not pay itself back in the form of ROI. Banks and critics alike have long made this argument and side with climate scientists who warn of its continual use of dirty fuel.
What Is Digital Currency?
Digital currency or cryptocurrency can be best described as a medium of exchange acting in the form of what is today’s widely used currency system. However, instead of exchanging paper and various metals, cryptocurrency is all virtual and made using specialized computers that generate mathematical concepts to determine value. These mathematical concepts are called blockchain, a digital ledger of transactions that uses hashing and is so difficult to determine that it cannot be done by humans. Instead, humans track the blockchain after they’ve been digitally signed for authenticity and a transaction is recorded to private ledgers.
When it comes to safeguarding cryptocurrency, it may come as a surprise that most experts advise storing in a cold storage which is an offline archive. This can also include a paper wallet or USB drive -- both of which would reduce energy consumption. However, the very lure of Bitcoin and other cryptocurrencies is their digital form. Many appreciate its ease of use in an online format which is why people gravitate toward it. Out of sheer convenience.
Could it be that convenience is luring environmental concerns away?
Digital Energy Consumption
For digital currency to exist, it involves data mining to the fullest effect. Though ‘mining factories’ as they are known have only carved out a miniscule section of the environment to date, their emissions contribution have garnered significant concern. For example, in order to run their sophisticated computer systems, the electrical energy output is often powered by fossil fuels. Specifically, it is the single transaction -- in all of its intricate complexities -- that creates such a high volume of energy. So high in fact, some experts have cited a study that illustrated digital currency’s electrical usage has nearly equaled that of the entire electric consumption of the country of Ireland.
Unlike our traditional paper currency, Bitcoin is restricted to virtual trade and use. Even more troubling, because Bitcoin is not operated by a central authority, mining factories can exist just about anywhere. That means factories can be built with almost no regulations in terms of size or energy output. And, these factories have literally thousands of machines running at a given time. In China, a data mining factory reportedly spends upwards of $80,000 per month in electrical usage. In a country already ravaged by poor air quality and fossil fuel use, this is an alarming fact. It is believed that China is the largest producer of Bitcoin. This is primarily because electricity is cheaper compared to other countries and the country relies heavily on fossil fuels to drive electricity. Sadly, this defeats the very policies that the country is attempting to instill as it moves toward a greener environment.
It is said that Bitcoin consumes 77KWh per transaction. To put it plainly, that’s roughly enough energy to power an average use home for nearly two weeks. It is clear that while digital currency is hot and has certainly caught the attention of similarly fast moving industries such as fintech, it is still moving at a palatial speed into the hands of everyday consumers and conservative banks. For this reason, it may be wise to rethink production efforts and imagine a less energy-draining alternative to making Bitcoin become a household thing.