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Cryptocurrency has continued to remain in the news, although the discussion seems to be evolving. In February, we shared with you that cryptocurrency may be less sustainable than you’d think. At that time, Bitcoin was already beginning to break records, exceeding $40,000. In April, it reached its peak with a high of about $65,000. Recently, it has struggled to surpass the $40,000 mark. What happened?
Environmental concerns connected to the virtual coins are now part of the mainstream discussion and are at least partially responsible for devastating plunges. Much of the chatter is centered on the currency’s electricity use, however, that isn’t the only impact on our planet.
Previously, we mentioned Elon Musk’s influence on the cryptocurrency market and that has continued to hold true. One jump came after he announced that Tesla would accept bitcoin as a form of payment for its vehicles and an equally large drop occurred when Musk backtracked in May. The company would stop taking the virtual coins until the mining process was more environmentally friendly, he said.
The announcement came in the form of a Twitter thread, which included a chart from the University of Cambridge’s Center for Alternative Finance, which has been collecting data about Bitcoin’s use of electricity.
Tesla & Bitcoin pic.twitter.com/YSswJmVZhP
— Elon Musk (@elonmusk) May 12, 2021
The Cambridge Center offers a feed of estimated electricity use that updates every 24 hours. Since 2014, there has been a steady increase. On June 24, the estimated usage of electricity to power the Bitcoin network was 8.31 GW, with a theoretical lower bound of 2.99 GW and an upper bound of 20.02 GW. The estimated annualized consumption is 78.19.
In Mid-June, Musk clarified with another tweet, saying the company would accept bitcoin once “there’s confirmation of reasonable (~50%) clean energy use by miners with a positive future trend.”
As we’ve explained before, the process of mining a single coin requires figuring out a mathematical puzzle so complex that it cannot be done by hand. Even incredibly powerful computers struggle, meaning that as the problems become more complex, so do the network’s demands. Currently, it is estimated that the energy used to mine a single coin could power an average household for a week, according to Coinpedia.
Independent research by Max Krause and Thabet Tolaymat published in Nature in 2018 calculated that it took about 17 megajoules of computer power to generate US$1 in bitcoin not factoring in the energy used for things such as cooling systems.
Mining bitcoin is often compared to mining other resources, like gold. However, Krause and Tolaymat calculated that at the time, the cost to mine a single bitcoin topped what it would take to mine gold (5 megajoules) and platinum (7 megajoules), valued at the same amount. The resource in the comparison that required more energy, was aluminum at 122 megajoules.
It’s important to keep in mind that in 2018 Bitcoin didn’t have the popularity (or the number of mining operations) it has today. The energy use has become staggering as if it weren’t already considerable.
More recent data from Digiconomist estimates that more than 400,000KWh (1,440,000 megajoules) of energy is required for a single bitcoin, compared to 22,000KWh for one bitcoin worth of gold. Commentary from the Digiconomist team published in One Earth noted that energy consumption, while off putting to investors, isn’t the only negative impact crypto has on the climate.
Powering the world requires significant amounts of water, and as you know, we’re facing a global water crisis. According to Water Footprint Calculator, roughly half of water use in the US and Europe goes toward generating power.
In 2010 it was estimated that power plants in the US consumed more than 40 percent of the country’s freshwater, about 161 billion gallons per day, according to Coinpedia. It was estimated that bitcoin used the equivalent of about .7 percent of the US energy supply during that time, according to Coinpedia. With those numbers in mind, it can be determined that in 2010, bitcoin operations in the US consumed over a billion gallons of fresh water per day, working out to about 411 billion per year.
This reflects water usage just one year into Bitcoin’s existence when the value varied between $0.0008 and $0.08. Although most data on the topic is at least a few years old, it can be assumed that Bitcoin is probably consuming more water.
In May, China’s State Council signaled a crackdown on cryptocurrency mining, according to TIME. This too contributed to a drop in Bitcoin’s value.
Chinese President Xi Jinping has promised to make the country carbon neutral by 2060. In February, the Guardian found that a single bitcoin transaction has the same carbon footprint at 680,000 visa transactions.
According to Cambridge, China holds the majority of mining operations. Prior to the action being taken, it was estimated that Bitcoin mining in China would generate 130 million metric tons of carbon emissions by 2024, according to a study in Nature Communications. Clearly counterproductive for a country working toward carbon neutrality.
Elon Musk is hardly the only person demanding a more sustainable approach to obtaining cryptocurrency. Individuals – and entire countries – are putting forth an effort to change things.
While China is putting the kibosh on mining, El Salvador has made Bitcoin a legal tender. President Nayib Bukele also announced that he plans to use geothermal energy power from volcanoes to power mining operations.
Clean, volcano powered hashrate coming soon… #Bitcoin🇸🇻🌋♻️
Sneak peek 🤫 pic.twitter.com/u7ocqkKTN0
— Nayib Bukele 🇸🇻 (@nayibbukele) June 23, 2021
Experts seem to disagree over how well the plan will play out, but the use of geothermal power and other renewable energy in the process of mining has slowly increased. According to Forbes, about 39 percent of mining is powered by renewables – primarily hydroelectric energy.
Additionally, some organizations are encouraging Bitcoin donations to help them further their mission. Among them is Charity Water, which recently started the Bitcoin Water Trust, which the organization calls “an exponential growth fund for clean water.”
The trust announced that with its HODL campaign, donations will be held until at least 2025, to allow the trust to appreciate.
The discussion surrounding cryptocurrency and the resources it consumes is unlikely to quiet down, and it is a conversation worth listening to.
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