- May 17, 2021
- |Bitcoin, Cryptocurrency
There has been an awful lot of noise about Bitcoin lately, in particular, Bitcoin in relation to the amount of energy, and subsequently, resources used in the Bitcoin mining process. The media masses have been pretty quick to report the worst possible case when it comes to Bitcoin mining and the energy consumption required to do so. Now, Elon Musk has chosen to drop Bitcoin from TESLA’s bill, stating that ” TESLA has suspended vehicle purchases using Bitcoin.”
What’s With All The Hype?
Why the sudden concern? Why now? Well, that’s simple, almost too simple, really. You see, in the past year, Bitcoin has seen an incredible 700% increase, excluding the current dip, of course. Major corporations and integral companies have added Bitcoin to their balance sheets over the last 12 months. We’re talking BIG names like Tesla, Goldman Sachs, credit card companies- Visa and Mastercard and even Amazon- have made the first step into the future, offering Bitcoin payment options.
That being said, people are starting to act a lot like HATERS. No seriously, they are peanut butter and jealous of the fact that Bitcoin wasn’t just “ a bubble”. Between the rising value of Bitcoin and the expedient mass adoption that the original cryptocurrency has gained, skeptics must search for another flaw within the brilliance of the blockchain!
But Is This Really The Full Picture?
So here we are, over a decade after “the bubble” should have popped and we see headlines like; ‘Bitcoin Consumes More Energy Than Argentina’, and ‘Bill Gates Sounds Alarm On Bitcoin Energy Consumption’.
YIKES! We all think, exchanging glances between our recycle bins, kitchen compost, and then down to our phones…at our Crypto Wallets. Naturally, these messages have many crypto investors questioning the impact of their actions. Is Bitcoin really that bad for the environment?
We Think Not…
The Cambridge Bitcoin Electricity Consumption Index (CBECI)states that
“The total energy consumed by bitcoin mining could reach 120 TWh (terawatt-hours) this year”
— that is just about 0.5% of the world’s total electricity production. This number, while pretty shocking, can seem further out of bounds when compared to say a region, or country, developed or less developed, which uses a small smaller portion of the electricity produced.
There is no denying that Bitcoin uses an enormous amount of electricity. The foundation of the very system and its underlying infrastructure consumes a lot of electricity.
Now, for just a moment let’s think about the traditional banking system. Think about everything it takes to keep that massive machine operating. We’re talking from the core-data center costs to brick and mortar branches, corporate offices, ATMs, and everything in between. All of these intricate pieces must be connected to power 24/7, 365. It’s safe to confirm the traditional banking system is far from green.
That being said, it’s super difficult to really quantify the overall energy consumption of classic fiat banking systems but research from Ark Invest suggests that the international banking and gold mining sectors are way more energy-inefficient than Bitcoin mining.
This same research concluded that traditional banking consumes about 2.34 billion gigajoules and gold mining consumes 500 million gigajoules of electricity per year. How many millions of gigajoules does Bitcoin mining consume, you ask? Only 184 million gigajoules… (man, that’s a fun word!)
What Exactly Is A Gigajoule?
Glad you asked.
But Wait, It Gets SO MUCH BETTER!
Let’s skip the currency part and go straight for the guts- the technology that lies beneath.
You see, the blockchain itself offers significant benefits, especially with trust and security in mind. To put it in perspective, consider the traditional fiat banking system. In order to safely and securely operate the banks must rely on a very diligent transaction of records. These transactions and records allow for consumers to do things like accumulate credit, acquire loans, etc. In order to maintain these records and monitor such transactions, banks must have more data centers and more employees, consequently using more and more energy. With Bitcoin and blockchain technology, we see smart contracts, further automating the process. This means fewer locations, fewer employees, less commute, fewer physical locations to be provided with extra resources, etc., ultimately leading to less energy consumption over time!
Bitcoin Is Inherently Borderless, Fiat Is Not!
Bitcoin is foolproof, providing a safe and secure way to take control of your finances without the need for a third party or bank involvement. In addition to this relieving fact, you will be happy to know that international transactions are just that simple. A transaction across borders but without any extra fees or exchange rates. This truth leads to significant energy savings via time and costs savings. That’s a double win!
As we mentioned before, the media has kind of placed an unfair bias on Bitcoin when it comes to energy consumption. Often forgotten, yet incredibly important to mention is the role that the Bitcoin mining industry has played in attempting to lessen the impact of their actions. For example, there are some areas on the map which end up having an overflow of energy-usually this occurs in areas of low economic activity and the excess energy goes to waste.
To counter the detrimental effects of high-energy use, many Bitcoin mining operations have set up shop in these jurisdictions where excess energy, normally unused, can fulfill its purpose, offering some balance.
The Bitcoin Mining Balancing Act
Another way Bitcoin mining facilities are working to counterbalance their energy use is by utilizing renewable energy sources.
As a matter of fact, According to CoinShares,
“Cryptocurrency mining activities tend to be concentrated in mountainous areas with large rivers. Renewable energy accounts for a large proportion of the overall energy mix used for Bitcoin mining, estimated at 73% of energy sources chosen by mining businesses.”
Also, some Bitcoin mining companies in North America have partnered with gas companies, using the waste gas produced by fractured shale formations to make energy, to mine Bitcoin! That’s a win for the planet, fintech, and oil companies!
In addition to the above-mentioned, there are innovations being made in the physical machines used to mine bitcoin to allow for a more eco-friendly operation. Many of the components currently rely on fans to keep cool, innovators in the field are working to perfect a coolant-based cooling system, eliminating the need for fans and thus using less energy.
At the end of the day, does mining for Bitcoin and other cryptocurrencies use a whole lot of electricity? Yes. Is it more than traditional fiat banking systems, NAH.
While there is always room for improvement, progress is something that the crypto space is certainly not lacking. With further education, continuing innovation and a little persistence Bitcoin has the potential to lessen the carbon footprint of our currency system overall, and to help save the planet!
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