Bitcoins have an environmental impact similar to that of oil

Energy - October 18, 2022

Damage to the environment for 12 billion dollars in 5 years

Despite the purely virtual nature of cryptocurrency, from the analysis carried out by some researchers from New Mexico, USA, pubblicated in Scientific Reports, it has been estimated that the production of BitCoin requires such a large amount of energy that generate a environmental pollution comparable to that caused by oil extraction.

The production of the so-called “electronic money” requires  electronic calculators in continuous process that carry out simple but extremely long calculations which, however, become more and more complex with the rise of the BitCoins amount in circulation. In 2020, the electricity required for calculations relating to the circulation of virtual money was estimated at 75.4 Terawatts per hour (TWh) corresponding to approximately a quarter of the total energy consumption of a nation like Italy in a year.

The electricity required to run computing machines that regulate the production of the cryptocurrency caused environmental damage, according to the American study, for over 12 billion dollars between 2016 and 2021, polluting more than the infamous cattle farms, considered to date, among the main causes of human-caused damage to the environment. The researchers estimated that the generation of a single BitCoin produces energy equal to half of its current market value representing, in general, 35% of the value of the cryptocurrency produced.

As of December 2021, BitCoin market capitalization was $ 960 billion with a 41% market share across all cryptocurrencies, and the environmental impact of such vast data processing has never been assessed. Now it is certain that it is a highly energy-intensive activity. The electricity needed by BitCoin computers is produced mainly from fossil fuels such as coal or from the use of natural gas because there are still few companies that are committed to radically more sustainable energy development.

At this point, are needed irrefutable data on the real energy consumption in the production of virtual currencies, to push nations politcs to create governance mechanisms for an emerging and decentralized industry to also regulate the production of cryptocurrencies.

Several cryptocurrency companies are approaching the topic with the adoption of extremely sustainable energy production systems, focusing on photovoltaics or wind power plants which, however, still fail to respond effectively to the demand for energy and are in any case integrated by classicand still too polluting systems.

BitCoin is focusing a lot, for example, on solar energy for the management of its computers while Ethereum, a direct competitor, is focusing on an important update of the company software called The Merge that marks the transition of the production network from proof-of-work. (PoW) to the Proof-of-Stake (PoS) consensus mechanism. The PoW system is based on a mathematical formula called “cryptographic” necessary for the validation of virtual currency transactions and requires significant computing power by computer systems in the face of a fairly small number of processed transactions. The PoS system, on the other hand, being a procedure based on a decidedly simpler and also defined as more “democratic” algorithm, uses much less energy and, since its inception in 2012, is considered the most suitable method to maintain efficiency due to a lower energy consumption.

After the change of course of Ethereum, there are many associations committed to protecting the environment, asking BitCoin to adopt the same system to reduce energy consumption. In response to this invitation, Angelo Kondylas, of Lumos Digital Mining, stated that the new BitCoin “mining” center in Australia, managed by the company it represents, has a potential for generating the cryptocurrency equal to 100 units in one year. using only the energy generated by photovoltaic panels.

 

Alessandro Fiorentino