Science

Environmental Impact of Bitcoin — A Cause For Concern?

With the rise in Bitcoin price and Tesla’s recent $1.5 billion purchase of the cryptocurrency, more and more people are turning towards bitcoin mining with the hope of quickly becoming rich. As such, there has been renewed interest in arguments that illustrate bitcoin as a cause of massive environmental damage. So, do these arguments have any validity, or are they nothing more than baseless attempts at trying to delegitimize cryptocurrency?

 

What Is Bitcoin Mining? 

Before we can talk about the environmental impact of Bitcoins, we first have to understand the critics’ main cause of concern: bitcoin mining. Through this process, bitcoin is “mined” into existence. All mining starts with the “blockchain,” an online decentralized registry that records transactions throughout a network. The goal of a bitcoin miner is to add individual “blocks” to the blockchain by verifying the legitimacy of bitcoin transactions (each block is one megabyte worth of these transactions). They achieve this by solving complex and sophisticated mathematical problems and algorithms created and readjusted by Bitcoin itself. Currently, miners get awarded 6.25 Bitcoins (302,578.75 USD) for every block mined IF they successfully solved the algorithm AND were the first ones to do so. 

 

One thing you may be wondering is why Bitcoin miners get paid such a huge amount of money for verifying the validity of a Bitcoin transaction. Well, by doing this, miners are helping to prevent the “double-spending problem,” which is when a Bitcoin owner illegally spends the same Bitcoin twice. This is a problem that solely belongs to cryptocurrencies because with physical currency, once you hand someone a $100 bill for a product, you no longer have the money. The same cannot be said with Bitcoin and others, which is why miners are needed. Additionally, with how much Bitcoin is worth right now, ensuring that no same Bitcoin is spent twice becomes all the more important

 

Environmental Impact? 

According to Cambridge Bitcoin Electricity Consumption Index, the energy used to create Bitcoin annually (127.68 terawatt-hours) is equivalent to the total annual electricity consumption of Argentina. However, when you place this statistic in a global context, bitcoin mining only accounts for 0.57% of worldwide energy consumption (22,315 TWh). It’s still a huge amount though. 

 

Now, most bitcoin mining takes place in China, where electricity is extremely cheap (a huge incentive for miners) and ⅔ of it is created by burning fossil fuels, mainly coal. As a consequence, bitcoin mining is indirectly killing the environment, which doesn’t have much significance since everything produced kills the environment to some extent. 

 

Why Does Bitcoin Mining Use So Much Energy?

The answer lies with one of Bitcoin’s basic principles, which states that as the popularity and value of Bitcoin increases, the difficulty for “mining” it also increases in order to not undermine its worth. Basically, as Bitcoin becomes more popular, the mathematical problems and algorithms involved in Bitcoin mining become much more complex. So, with over 18.5 million Bitcoins in circulation as of February 27, 2021, only special computer equipment can handle the intense processing power needed to solve the intricate algorithms and get Bitcoin. As a result, Bitcoin miners need more and more computing power if they wish to have a chance at getting rich. Now, what does this have to do with energy usage? Well, higher processing and computer power = exponentially more electricity needed to operate. Also, keep in mind that most “mining rigs” are running 24/7, further increasing electricity usage. 

Amado Krsul

My name is Amado Krsul. I am a junior from Croatia who was raised in Bolivia and loves video games (mostly Apex Legends and Rocket League). My favorite food is paella. A word that would describe me would be industrious.

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