How bad is bitcoin for the planet? How is mining cryptocurrency harming the environment? Here are the facts and opinions behind bitcoin and its effect on climate change.
According to analysis by Cambridge University, Bitcoin, the most popular cryptocurrency on the planet uses as much electricity annually than the entire country of Argentina.
We’ll just let that sink in.
But what is Bitcoin? And how can it possibly use so much electricity?
We’ll start with the basics on Bitcoin, the first cryptocurrency to surface in our ever-growing digital world. Not only the first, Bitcoin remains the most popular cryptocurrency even today with over 18.5 million bitcoins mined to date.
Bitcoin is a digital currency that you can buy, sell and exchange directly from and to other miners without the need for a third party intermediary, such as a bank. Which means that Bitcoin works exactly like a $1 coin, but in a digital format.
Satoshi Nakamoto, presumed to be a pseudonym for the Japanese inventor of Bitcoin, (and who is now a member of the world’s 20 richest people!) created the virtual currency because ‘there was a need for cryptographic proof instead of trust.’
But now into the techy stuff. Each Bitcoin is essentially a computer file which is stored in a digital wallet app on a smartphone or computer.
When buying a product, trading or simply gifting the cryptocurrency, Bitcoin can be sent and received from and to digital wallets. And in order to obtain Bitcoin, someone can buy Bitcoins using ‘real’ money, sell items or services and allow people to pay with Bitcoins or they can be created using a computer – this is what the term ‘mining’ means.
How does Bitcoin mining work?
Here’s the shortest lesson on Bitcoin… ever. In order to create new Bitcoin, it needs to be ‘mined’. This means programming your computer to work out a series of difficult sums which are rewarded with Bitcoin for owners to keep.
Is Bitcoin’s damage to the planet really just ‘dirty baggage’?
We know anything digital isn’t really that eco-friendly, but is Bitcoin taking it to a new level?
More recently, Bitcoin’s negative effect on the planet has been labelled as dirty baggage, meaning the electricity it’s using on a yearly basis is causing more pollution than many countries around the world.
Simply put, the high powered computer systems that Bitcoin uses to mine, trade and produce require massive amounts of electricity, and therefore has a negative effect on the planet. What makes things worse is that since Bitcoin is designed to become harder to mine over time. Combined with the increase in the number of people using and mining Bitcoin, the electricity consumption will continue to grow quickly.
The industry is predicted to reach 21 million Bitcoin by 2040. Which leads us to believe the demand for energy that’s used to mine the currency will undoubtedly rise.
Is Bitcoin really bad for the planet?
Well.. yes. There’s no disputing that the increase in Bitcoin mining and use has led to a higher energy consumption and therefore increased carbon emissions.
In actual fact, annually traditional banking and gold mining still produce more carbon emissions that Bitcoin.
So, is it Bitcoin that’s really bad for the planet, or would green energy help to rectify its bad reputation? And are we better of putting our money into ethical banks rather than traditional ones that are investing in planet polluting industries?