Cryptocurrency is a currency that is catching a lot of heat at the moment, with a big focus being on “Bitcoin” - a popular cryptocurrency popularised by huge investments from Elon Musk.
Up until recently there have been whispers and talk about the environmental impact this sort of trading has, however, the environmental implications where brought to light when Musk raised concerns about the currency's environmental impact.
Recently Elon Musk tweeted, “Cryptocurrency is a good idea on many levels, and we believe it has a promising future, but this cannot come at great cost to the environment.”. Thereby announcing that Tesla will no longer be accepting Bitcoin as a form of payment and that he would be be pulling out a portion of his investment until a more sustainable way of trading this form of digital currency is found.
Bitcoin first started trading in July 2010 and has since grown exponentially. This digital currency was designed with equity in mind, working off the system of what is termed “Mining”. A miner is a person sitting behind a computer, who attempts to be the first person to solve the “cryptographic puzzle”. Mining is Bitcoin’s system they use to confirm a transaction. When a person wants to make a transaction using their bitcoin currency, they need to be verified as the valid owner. This is then digitally recorded in a database known as a “blockchain ledger”.
Miners can receive up to 6,25 bitcoins per block solved, currently valued at around $300 000. Because of Bitcoin’s rapid growth, these puzzles are no longer being solved in someone’s bedroom on their computer but rather by massive companies who have high-powered computers that are consistently running complex mathematical problems.
This is where we arrive at the environmental issues caused by Bitcoin. These high-powered computers use an excessive amounts of electricity which is mostly generated by fossil fuels. To put this into perspective Bitcoin's energy usage is around 120 terawatt-hours per year, that is one trillion watts per hour.
Large numbers like that mean large carbon emissions. BofA Securities research showed that Bitcoins carbon emissions have grown by over 40 million tons in the last two years. That would be like picturing 8.9 million new cars on the roads and 632,000 average homes being powered with electricity.
But fear not, there are potential solutions to this excessive use of electricity which some countries have already partially implemented. For example, using renewable energy sources like hydropower or governments potentially applying a carbon price to companies who are mining cryptocurrencies.
What does this mean for the Bitcoin cryptocurrency crew? It puts pressure on other companies to stop using it as a currency, companies can potentially be shunned by investors as the question of “Is it compatible with ethical investment?”, and ‘greener’ cryptocurrencies will now gain more attention such as “Chia”. All we can now do is wait and see if Bitcoin succumbs to the pressure that many other industries have faced as it seeks out more green alternatives.