As Bitcoin adoption increases, a new study published Monday by Nature Climate Change warns that energy-demanding Bitcoin transactions would easily sling the global temperature past the 2-degree threshold set under the Paris Climate Agreement. But, is it true that Bitcoin is this energy inefficient that the mainstream media portrays?
While Bitcoin’s precipitous rise has been stunning, many are still ignorant of the Bitcoin phenomenon saying it is still too arduous, complex and even too libertarian. Add this to the border-less and global nature of Bitcoin, and we quickly have a regulatory concern that different governments are not willing to take a risk on. Initially, the very objective of Bitcoin was to create a better alternative to fiat and even if adoption is still low, that objective is still in line. And encouragingly, governments are beginning to embrace blockchain formulating new laws that classify Bitcoin as commodities, subject to taxation.
The Bitcoin Mining Energy Debate
But even in the face of increasing adoption, scientists are raising the alarm. Complementing this are trackers such as the Bitcoin Energy Consumption Index relaying estimates on the prodigious amount of energy required and raising awareness of “how unsustainable proof of work systems is”. The creators of these trackers go on to say it is not the amount of energy that the network uses but the realization that most of these mining rigs are powered by coal-fired generators from China.
According to BECI, each transaction requires 812 KWH translating to an annual demand of 73.12 TWH. This is around 404.89 KG of Carbon-dioxide per transaction that is pumped to the atmosphere edging the global temperature closer to the 2-percent threshold.
Researchers said greenhouse emissions from Bitcoin mining rigs was around 69 million metric tons in 2017. However, that was not enough to propel Bitcoin to the mainstream as it contributed a mere 0.033 percent of the world’s cashless transactions.
At this rate, scientists from the University of Hawaii at Manoa said it was enough to push global temperatures above pre-industrial levels assuming the same energy sources, which is mainly coal, were used.
Bitcoin Miners are Green Energy Promoters
Regardless, Bitcoin maximalists are desirous and working towards an ecosystem that is crypto powered insisting that it is better and will slowly eat up the $8.7 trillion of political money called fiat.
Supporters, such as Eric Masanet of the Northwestern University, insist that the recent study is “fundamentally flawed” laying out fact that the global energy is actually de-carbonizing and more efficient rigs are in the pipeline. Besides, he adds that it is hard to predict rates of adoption, future efficiencies and sources of energy of which the study bases its conclusion on.
Furthermore, making the basis of this study shallow, is the is the assumption that Bitcoin would in the future act as a medium of exchange. Though novel and ideal, it is likely that Bitcoin will end up as an investment vehicle acting as a store of value.
Additionally, since Bitcoin is a global phenomenon, environmentalists shift away from the energy intensity drum beating to the realization that while Bitcoin mining is concentrated in China, there are other geographies like Iceland that make use of 100 percent renewables like geothermal and wind energy.
According to Katrina Kelly-Pitou, Strategy Manager at the University of Pittsburgh’s Center for Energy, energy production can increase without negatively impacting the environment. She adds that even if Bitcoin market cap is to increase hundred-folds, it would still be more energy efficient than traditional banking systems.
“Even if Bitcoin technology were to mature by more than 100 times its current market size, it would still equal only 2 percent of all energy consumption.”
Bitcoin and Blockchain Here to Stay
It’s increasingly becoming clear that Bitcoin is here to stay. Needless to say, Bitcoin is ingenious and potentially transformative, but at the same turn adopters cannot turn a blind eye to the negative effect of Bitcoin’s energy requirements. Considering that there is a direct relationship between adoption and energy demands, blockchain promoters and enthusiasts are always on the innovation front researching and implementing new energy efficient technologies.
After all, it is the miner’s responsibility to stay profitable even as energy requirements and fossil fuel prices sky rocket. In fact, the need of efficiency is so strong transportation costs are incurred as miners migrate from time to time to new jurisdictions with more favorable energy rates. This is why the miners are charting new territories, advocating for the need of green energy sources, and are not the axis of evil as the study implies.
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