Over the past year, Bitcoin has enjoyed new fame with large companies adopting cryptocurrencies, which has sent prices surging. Many companies are increasingly adopting the cryptocurrency, whether by allowing customers to conduct transactions on their platforms using the cryptocurrency or by investing in it directly. Companies like Tesla, Square, and MicroStrategy are among the few who have invested in the cryptocurrency. Just this week, Tesla’s CEO announced that people can now buy a Tesla with Bitcoin.
The positive developments we’ve seen over the past year have helped Bitcoin surge to new highs above the USD 60k mark in the beginning of this month. Today, more and more investors are looking to profit on the token's growing popularity. However, many players in the financial sector haven’t quite warmed up to cryptocurrencies' use as an alternative asset just yet.
The environment is a key topic consumers are increasingly caring about. Thus, companies and investors are also focusing more and more on climate change. A topic that is gaining increased notoriety in the whole cryptocurrency saga is its environmental impact. Energy consumption related to Bitcoin mining is slowly but surely starting to gain traction in this debate. While critics decry it as an energy hog, there are proponents who hail it for being less intensive than the current global economy.
Let’s take a look at the former. According to billionaire philanthropist Bill Gates, for instance, Bitcoin uses up a concerning amount of energy.
Alex de Vries, a data scientist at the Dutch Central Bank, says that he’s “never seen anything that is as inefficient as Bitcoin. According to estimates by de Vries, each Bitcoin transaction requires an average 300 kg of carbon dioxide (CO2). To put this in perspective, that would be the equivalent to the carbon footprint produced by approximately 750,000 Visa swipes.
How and why?
Nearly all cryptocurrencies, Bitcoin included, document every single transaction on a so-called “public ledger”. This public ledger helps ensure transactions are transparent and safe from tampering, however, it continuously requires additional storage space, or so-called "blocks."
Those blocks are created by miners, who are awarded Bitcoin for their work, running code around the clock on special hardware called “rigs”. Now picture this: that entire process consumes the same amount of energy annually (approximately 78.5 terawatt-hours) as nations like Austria, Chile, and Finland.
But, how unusual is this energy consumption compared to many other aspects of modern life in an industrialized society like ours?
On the other side of the debate, propenents argue that the entire Bitcoin ecosystem consumes less than 10% of the energy required for the traditional banking system. However, it’s important to remember that it is, in fact, true the banking system serves far more people. Cryptocurrency, however, has not yet matured and, like any industry, the early infrastructure stage is particularly intensive.
Clearly, there are many disagreements about how big the cryptocurrency industry’s carbon footprint is. Yet, everybody would agree that it is big.
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