If bitcoin were a country, it would be 41st in the world in terms of energy consumption, just behind Chile and Austria
Last year’s bitcoin frenzy appears to have run its course. The cryptocurrency’s near-vertical ascent to more than $19,000 was followed by an equally precipitous decline as speculators fled the market as fast as they had joined, leaving ownership to those in it for the long haul and still confident in its inherent value. The result is that bitcoin has now found a modicum of peace. To be sure, the currency has continued on its downward trajectory – in mid-July it sat around $7,500 – but the fall has been gentler and some positive noises are again being made on its longer-term potential.
However, for the millennial investor in particular, there has emerged a new and little foreseen problem – bitcoin’s increasingly enormous environmental impact – which threatens to derail the entire project if allowed to deteriorate further.
“The bitcoin phenomenon has ignited a controversial debate amongst many stakeholders on whether cryptocurrencies is just another bubble in the making, or just another fad, or actually an innovative technological advancement similar to that of the internet, that will disrupt the financial industry” said Mustafa Adil from Thomson Reuters, a strategic partner in the upcoming World Green Economy Summit taking place on 24 – 25 October 2018 in Dubai.
The problem lies in the way in which bitcoin operates. With no central authority or bank overseeing transactions, there needs to be a way to check that a bitcoin hasn’t been expended again before the transaction is cleared, that the sender actually owns the sent amount, and that input and output expenses match. This task is undertaken by ‘miners’, who compete against each other to be first to solve the complex mathematical problems required to authenticate a block of transactions, which are then permanently appended to the blockchain, and are rewarded for their efforts in new bitcoin.
Massive increase in mining power requirements
When bitcoin was first introduced in 2009, all that was needed to mine for cryptocurrencies was a simple home computer. But as more and more blocks of bitcoin were added, the mathematical difficulty increased, and the computing power required soared way beyond the means of the lone miner.
A major problem of this exponential growth is the sheer amount of electricity now used by competing cryptocurrency miners. If bitcoin were a country, it would be 41st in the world in terms of energy consumption, just behind Chile and Austria, and just ahead of Switzerland and the Czech Republic, according to the Bitcoin Energy Consumption Index. And added to this problem, the bitcoin network is mostly fuelled by coal-fired power plants in China, resulting in a truly massive carbon footprint
If bitcoin and other cryptocurrencies are to continue to be attractive, this will have to be remedied.
Enter the green cryptocurrency.
There are several ways in which the latest generation of cryptocurrencies are tackling the problem of unsustainable energy consumption.