How Bitcoin Mining Affects Climate Change :
On November 10th, 2021, Bitcoin reached an all-time high value of 69,045.00 US dollars. This figure meant that the value of creating a new bitcoin was worth 69,045.00 US dollars to those mining bitcoin. Although Bitcoin has fallen from its all-time high (ATH) value, it is still worth about 16,844.00 US dollars today to create a new bitcoin.
To understand how bitcoin affects climate change, it is essential to understand what bitcoin mining is and how it works.
What is Bitcoin?
To begin with, Bitcoin (BTC) is a cryptocurrency that is designed to function as a decentralized digital currency where any form of control is outside the influence of any entity. One of the key ideas behind Bitcoin is that it exists as a currency without any central agency bank to manage its supply and demand. This is done through a transparent ledger system known as a blockchain, where anyone can observe and validate every transaction.
Bitcoin was created in 2008 by an anonymous entity using the name “Satoshi Nakamoto” as an alternative financial system. 14 years later, Bitcoin has largely failed as a replacement for the current financial system. Although it is accepted as legal tender in El Salvador, Bitcoin has been outrightly banned in 9 countries and implicitly banned in 42 countries. Its current use is more as a store of value with a marketplace of people trading Bitcoin.
What is Bitcoin Mining
Bitcoin mining is the process of creating a new unit of bitcoin. The more technical explanation is that Bitcoin mining is validating and adding a new transaction to the blockchain ledger. To achieve this, there is a need to solve complex mathematical puzzles.
The first to solve a mathematical puzzle and arrive at an answer is awarded a new bitcoin. The entire process of bitcoin mining is called the Proof of work consensus. It achieves the purpose of securing the bitcoin network and validating transactions. One of the reasons is that Bitcoin is a finite financial instrument with a total of 21 million and only about 1.8 million left to mine.
The Environmental Challenge from Bitcoin Mining
The proof of work used to generate new units of bitcoin is energy intensive. Large computers typically generate the solutions to mathematical problems or puzzles on a trial-and-error basis. This means bitcoin miners power supercomputers trying to obtain the solution to gain new bitcoin.
The energy demands for the proof of work concept are enormous. At an estimated 121.36 terawatt per hour, bitcoin mining consumes more power than countries such as Israel and Argentina and the combined energy usage of Apple, Microsoft, Facebook, and Google. Competition drives miners to more supercomputers and cheaper electricity. A study showed that Bitcoin mining delivers 22 million tons of CO2 to Earth yearly.
Conclusion
With a market cap of over 300 billion, Bitcoin mining is a profitable venture for miners. Due to its attractive nature, many miners are attempting to mine a new bitcoin. However, this business is highly energy intensive and can be a significant challenge to achieving climate goals. One report estimated that Bitcoin could tip global warming beyond 2°C.
