Have you ever thought about the environmental impacts of Bitcoin? Cryptocurrency has become one of the most famous phenomena of the 21st century. In April 2011, the price of Bitcoin was $1. As of the April of last year (2021), it reached an all-time high of almost $65,000, and as of March 2022, each one is worth approximately $48,000. You can see from these numbers that more and more people are into cryptocurrency. However, the rising interest makes could ignore the environmental impacts of Bitcoin.
To know more about the environmental impacts of bitcoin, first, we need to know the way it works.
What is Bitcoin Mining?
In simple words, Bitcoin mining is creating or gaining new bitcoins via solving mathematical puzzles with a high level of difficulty. The process s of solving the mathematical puzzles is called proof-of-work (PoW).
Miners could solve these puzzles with simple computers (CPUs) in the very beginning. However, the creator of the bitcoin Satoshi Nakamoto designed a system where the mathematical puzzles would become more challenging to solve. One of the main reasons behind the system creation is the growing competition on bitcoin mining over time. Moreover, the competition is also the reason behind bitcoin’s skyrocketing prices.
Nowadays, miners use more advanced technology such as special computers that are much more efficient per attempt (or hash) of the puzzle. We call this special technology ASIC systems. Proof-of-work cryptocurrencies such as bitcoin need a large amount of energy. Sometimes this “large amount of energy” is more than what the entire country uses. There are two reasons behind this:
- They keep running incessantly.
- They require energy to cool down the hardware that prevents overheating.
The environmental impacts of bitcoin
One of the main issues of bitcoin is its energy consumption. The use of energy as much as whole nations use per year, such as Finland, Malaysia, or Sweden. In addition, the use of energy in bitcoin mining is growing annually.
Furthermore, bitcoin transactions are also the primary energy consumers. The average bitcoin transaction consumes more than 1,700 kWh of electricity. It is twice the monthly amount used by the average U.S. household. In addition to this problem, several bitcoin mining operations have collaborated with struggling fossil fuel power plants. It keeps some power plants online that would otherwise have retired and increases overall carbon emissions.
Some large bitcoin operations are relocating themselves, for instance, China. Previously, the country used to be where enormous amounts of mining operations were held. The Chinese government banned Bitcoin mining, causing the relocation of bitcoin miners to other countries with cheap energy sources.
Environmentally friendly cryptocurrency
As mentioned above, bitcoin is hazardous to the environment due to the proof-of-work process that needs a lot of electricity to power millions of servers continuously. However, some cryptocurrencies have fewer impacts than Bitcoin’s environmental impacts.
Ethereum is the largest cryptocurrency after Bitcoin. It changed its PoW system to a proof-of-stake (PoS) system. The Ethereum randomly chooses a person to solve the block, which reduces energy consumption by 99%. Furthermore, many new blockchain players like Solana and Cardano use PoS system as an alternative to reduce energy consumption. The future blockchain technology should take the energy issues into consideration and create with environmentally friendly technology.
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