For the longest time, Bitcoin, the Internet’s largest cryptocurrency, slowly puttered along as essentially a libertarian thought experiment. That is, “why rely on the American Dollar, which is backed by a federal reserve, when a community can collectively create a separate currency?” Years ago, Bitcoin users were lucky to purchase pizza with their independent coin, but today the value of a single coin is equal to approximately $18,000, which is no small sum. There is much speculation today over whether this exponential value increase is a sign that the currency is gaining public traction, or whether it’s merely an investment bubble.
I’m not an economist, and as such have no expertise on whether Bitcoin will see further success or not. I’m going to discuss the difficult conundrum of cryptocurrency, most exemplified with Bitcoin: the environmental cost of their energy consumption.
Now, why would the energy consumption of a digital currency matter, you ask? Surely it could not be that much! Unfortunately, it is. The key process of creating a Bitcoin is the mining process, in which a computer solves incrementally more difficult equations, with the user who solves the equation “winning” a Bitcoin. With the value of each coin skyrocketing, Bitcoin investment has become big business; entire companies dedicated to mining Bitcoins set up massive server farms to solve these encrypted calculations. Many of these so called mines are cropping up in China, and run exclusively on coal-powered electricity.
Due to this so-called Bitcoin gold rush, the energy consumption rate for the coin has increased tremendously. The electricity consumed for mining operations has eclipsed the energy rates for the entirety of Ireland, and if it continues at current rates, will rise above the rate of energy use for the entire United States. By 2020, it could consume more energy than the entire world combined.
Proponents of Bitcoin argue that while there does need to be a shift towards renewable energy in the industry, there’s no call for alarm. They claim that as the equipment utilized in mining becomes more efficient, the energy consumption rate will drop. However, Alex De Vries, who authored a report on the consumption rates of Bitcoin mining, says the opposite.
“I’ve actually seen this argument come up a lot of times, and I honestly have no clue where it comes from, or what it’s based on,” he said. “What we’ve seen over the past years is that mining equipment has become hundreds of times more efficient, and has actually contributed to more energy” being drawn from the network, he explained.
“The whole system still uses thousands of times more energy than we have before,” he said. For example: though operationally, solar energy is clean, the lifetime emissions cost of making and disposing of a solar panel is not; the energy-hungry cryptocurrency would require the creation of many more solar panels than needed otherwise. “We’re still creating a carbon footprint that’s bigger than it has to be.”
There are few ways to manage the consumption rate of cryptocurrency as is. One would be to engage in a worldwide regulatory campaign for the currency, which would be next to impossible. The other is to wait and see if Bitcoin’s price drops; after all, if there’s no market in mining, gold rush miners will move to something more profitable. And so as concern for the environmental impact of Bitcoin mounts, the world waits to see if the market will boom or bust.
For those interested in learning more about cryptocurrency, below is an interview CFPUP conducted with Bryan from PIVX, a rival cryptocurrency.