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Cryptocurrency is the notorious climate culprit. A study conducted by the University of Cambridge in February concluded that the global network of Bitcoin “miners”-operating large numbers of computers and competing to unlock coins by solving increasingly difficult mathematical problems-consumes as much electricity as the Argentine country each year . According to an article published in Joule Magazine on March 10, in terms of greenhouse gas emissions, this is equivalent to the emissions in the London metropolitan area, because the amount of Bitcoin mining soars as the price increases.
For a relatively small number of miners, traders, and cryptocurrency investors, this is a large amount of carbon pollution that benefits services. For companies like Square or Elon Musk's Tesla that claim to be climate-friendly but own a lot of Bitcoin, this is a potential liability. Therefore, a small but growing number of companies are looking for ways to clean up the Bitcoin market. Unfortunately, the way digital currencies work today rewards waste of energy-it is not clear that even a well-intentioned effort to use cleaner energy does not justify the market’s never-ending appetite for electricity.
The latest attempt at Green Bitcoin comes from Norway. On March 8, Kjell Inge Røkke, the country's second-richest man and oilfield services billionaire, founded a new company called Seetee. In a letter to shareholders, Røkke stated that the company’s goal is to “establish a mining business and transfer stranded or intermittent electricity - wind, solar, water power - where there is no stable demand in the local area - to one that can be used anywhere. Economic assets.” He wrote that Bitcoin is “a load-balanced economic battery that is essential to the energy transition required to achieve the goals of the Paris Agreement.”
In other words, the plan is to locate Bitcoin mining centers in areas where renewable energy farms generate excessive power during periods of low demand and absorb the excess power for mining. Mines obtain low-cost, zero-carbon electricity; wind or solar power plants have obtained reliable major customers.
Alex de Vries, the digital currency economist who wrote the Joule article, said that this approach has a fatal flaw. It assumes that mining operations can be suspended when electricity is needed for other purposes that are more beneficial to society. But mining is only effective when it is running 24/7. Whenever a miner unlocks a coin by successfully verifying a transaction on the blockchain, the next set of calculations will automatically become harder to crack. This is a race against time: the only way to outperform the competition is to use the cheapest power source and run more machines more frequently. (Seetee did not respond to a request for comment.)
De Vries said: "Every time you close, you will lose a certain level of income, and it will never be able to recover" and will always be behind.
The "battery" analogy is also weak, because theoretically the same energy can be used to charge actual batteries, hydrogen fuel cells, or other systems, and once they become more widely available, they can help decarbonize the wider grid. Nevertheless, some Bitcoin businesses are already using zero-carbon energy, at least part of the time. In China, some mining operations are shifted seasonally to use low-cost hydropower in the summer, but re-use coal in the winter. Bitcoin miners are also chasing cheap hydropower in Canada and the Pacific Northwest of the United States. In a 2019 Cambridge survey of 280 Bitcoin companies, 39% of companies stated that their mining activities are powered by renewable energy.
In some cases, especially in China's large hydropower dams, Bitcoin mining farms are likely to use energy that would otherwise be wasted. The Russian state-owned gas company Gazprom also has a division that sells bitcoin miners’ electricity generated by flare gas, which is a waste by-product of oil and natural gas drilling and processing, which would otherwise emit emissions (although using it for bitcoin would generate profits) incentivize drilling More).
Since mining activities greatly exceed the availability of "surplus" energy, even the most benevolent and credible efforts to use green energy will eventually fall into ethical dilemmas: when the world is racing, cryptocurrencies are really capital and natural resources. The best use of it? Decarbonization?
"If you wait long enough, the grid will become more environmentally friendly, but at the same time, Bitcoin will lead to a large number of substitutions," De Vries said. "The renewable energy that we could have used to clean up the grid will be used for Bitcoin mining."
Roberto Rigobon, professor of applied economics at the MIT Sloan School of Management, said that more solutions, including energy-efficient digital trading methods, may be implemented within the code itself. He said that Bitcoin's mining method "is a very bad system, and the competition for excessive use of energy determines the winner." However, "this is purely a Bitcoin issue, not a cryptocurrency issue."
Nonetheless, fundamental changes to make innocent digital currencies widely available—for example, the complete abolition of the mining process in order to adopt a blockchain approach that requires less computing—requires consensus within the mining community and can cause a collapse in the value of the currency. risk. Ethereum, Bitcoin's main competitor, is planning such a technological shift on an uncertain date.
At the same time, digital payment platforms that accept cryptocurrencies have only just begun to study their climate footprint. A PayPal spokesperson said that the company is studying this issue and “looks forward to the emergence of much-needed best practices and standards to help carefully measure and address these emissions.” Its competitor, Square, announced an announcement in December. The $10 million "Bitcoin Clean Energy Investment Program" to support environmentally conscious Bitcoin companies, but no name has been disclosed yet.
The carbon footprint will only rise as the price of Bitcoin rises. Even if prices fall, every new computer that comes online to get a big payday may lock in energy demand. De Vries said that if things get too hot, some governments may choose to unplug, because the grid regulator of Bitcoin hotspots in Inner Mongolia decided to do so this month. Or they can impose new taxes on the electricity consumption of miners or the few companies that make cryptocurrency mining hardware. De Vries said the key is to "make the community aware that this is a problem we need to solve."
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