While many people have at least heard of Bitcoin, most know nothing about the mechanics, logistics and history of cryptocurrency and its impact on daily life. While we often hear headlines about the rise and fall of Bitcoin’s value, we seldom hear much information about its environmental impact and related computing requirements.
What is Cryptocurrency?
Before discussing how Bitcoin could possibly play a role in climate change, let’s talk about what Bitcoin actually is and how it was created. Bitcoin developed as an idea to create a new form of money based on openness, decentralization and security. Bitcoin has become more than a digital currency. To many Bitcoin adopters and collectors, Bitcoin, and cryptocurrency in general, has become a movement. While we won’t debate the driving forces and ideologies behind cryptocurrencies here, let’s just say those who trade it are pretty darned passionate.
Although Bitcoin is a household name and synonymous with cryptocurrency, it is by no means the only kid on the block in the digital currency stratosphere. Bitcoin is just one of many digital currencies widely traded and exchanged on the open market and between parties. For example, other currencies include Ethereum and Litecoin, which trade for less than Bitcoin.
What is Mining?
Owning Bitcoin and its close cryptocurrency cousins may pose little harm and use very little resources to its owners. It’s the act of “mining” that begs a closer look. Mining involves computing power, electricity and mostly, computer hardware. Maybe you’ve been at a party or family gathering and heard someone telling a story about mining for Bitcoin. It seems that everyone knows someone who has explored the idea of Bitcoin mining.
The mechanics of Bitcoin mining require power. This power comes from the grid or some sort of renewable energy source that generates it. Bitcoin miners connect a network of computers and servers to solve a mathematical puzzle that continuously regenerates to create a new puzzle. This goes on 24 hours a day worldwide. As we speak, someone—no, a lot of “someones”—are mining for Bitcoin. The reward for solving these puzzles and processing Bitcoin transactions is… more Bitcoin.
For the average person, it can be daunting to grasp just how much computing power this network of hungry machines use over the course of a day.
Flipping on the Lightswitch
With so many energy resources devoted to this digital currency, what’s left for the rest of us to just turn on the lights at night? According to a recent Newsweek report, cryptocurrencies are projected to use “as much energy as the entire world” by the end of 2020. This may seem unrealistic, but consider that crypto mining already uses the energy resources of a nation the size of the Czech Republic with a population of 10.6 million people. Researchers Elite Fixtures valued the cost of mining a bitcoin from $531 to $26,170 depending on the country in which the mining takes place. These costs, based on average utility rates, fluctuate based on Bitcoin demand. Not only are there significant cost differences globally, but also throughout the U.S. For example, mining for Bitcoin in the state of Louisiana as of 2017 cost miners approximately $3,224 while mining in Hawaii cost miners $9,483.
Bitcoin analysts argue that these estimates are overestimated by a factor of 1.5 – 3.6x. There’s definitely room to contend that actual cryptocurrency mining energy consumption lies somewhere in the middle. Yet, the question still remains—is Bitcoin bad for our environment and a contributor to global warming? Consider that the Bitcoin network consumes approximately 343 megawatts of power, which equates to about a third of the homes located in San Jose, according to The Balance.com.
Technology Always Finds a Way
Like many previous “big idea aha technologies” developed since the invention of the airplane in 1903, technology tends to find a way. The cryptocurrency community will argue that the technology will get better, more efficient and will course correct. Those who are the problem will become the problem-solvers as time goes by.
GEAR Token, for example, has risen as a company dedicated to providing renewable energy alternatives to mining for cryptocurrency alone without reinvesting in the environment. A portion of GEAR’s mining profits will go back into clean energy projects, fostering investment in renewable energy. GEAR plans to offer a “self-financing” investment platform for cryptocurrency miners seeking alternatives to the current mining landscape. GEAR lays out a four-point strategy for investment, expansion, and sustainable growth in both cryptocurrency mining and green energy development.
While the arguments against mining Bitcoin and cryptocurrencies and their detrimental effect on the environment mount, the demand for Bitcoin continues to grow, as does its legitimacy. More and more businesses now accept Bitcoin as a valid form of currency and payment. And, researchers are looking for ways to shore up identity management and reduce identity theft with blockchains like Bitcoin. Yet, the growth of cryptocurrency mining depends on smarter, more thoughtful solutions that both honor the spirit of the peer-to-peer decentralized currency movement and also protect natural resources and planet Earth.
M.Nicole Dillon is a freelance writer, avid foodie, and passionate renewable energy advocate. M.Nicole recently moved to the Bay Area and plans to explore and write about relocating to the Bay.