FEATURE
21
Crypto Weekly
What is the Real Impact of Bitcoin & Altcoin Mining on the Environment? The amount of electricity used by cryptocurrencies is now almost equivalent to that of Malaysia. However, when you look at the current financial system and all that goes into it, that is a very small number
S
ince Bitcoin has become increasingly mainstream, investors and the general public have naturally had questions about how it works. A question has been raised about the potential environmental impact of mining, which generates and verifies bitcoin transactions. According to the Cambridge Center for Alternative Finance (CCAF), comparisons suggest the bitcoin network uses more than 121 terawatt-hours (TWh) annually, which would rank it in the top 30 electricity consumers worldwide if it were a country. This is about 0.55% of global electricity production or about the same as the annual electricity consumption of small countries like Malaysia or Sweden. That certainly sounds like a lot. However, what is a sensible amount
www.cryptoweeklymag.com
of energy to use by a monetary system? Bitcoin's surging price has fueled the rise in energy demand in recent months, which has seen it rise to close to $50,000 today. Bitcoin's network's energy consumption did not rise to critical levels until 2017 when a significant price jump drastically pushed up its energy needs to the level of a small country. Market prices dropped in the years that followed, and so did energy demand, although consumption now is more than double where it was five years ago. As a result, the longterm forecasted energy demand is even greater than before. Bitcoin's carbon footprint will grow exponentially as its price rises due to
increased competition for the currency, resulting in more energy consumption. In other words, bitcoin miners gravitate toward cheap electricity, indicating the fundamental problem is not bitcoin, but an insufficient supply of renewable energy. Incentives encourage miners to find the most cost-effective sources of energy. Due to the storage issues associated with renewable energy sources, excess power generated from those sources is generally wasted. More than half of the world's mining took place in Sichuan, China, where excess hydroelectric power allowed mining to be powered by 95% renewable energy. Recent political proclamations have caused these companies to leave China, and they are mainly going to North America, where more renewable
