Bitcoin and other cryptocurrencies have received a lot of negative attention in recent months and years for their absolutely staggering energy consumption. Bitcoin alone consumes approximately the same amount of energy the Netherlands thanks to the extremely energy-intensive “mining” process in which miners hook up computers--in some cases entire warehouses full of them--to solve complex computational puzzles to verify transactions (a process known as “proof of work”) in the public blockchain ledger on which the cryptocurrency system depends--a job for which they are rewarded with small amounts of Bitcoin. As such, the more computers that are busily contributing to the blockchain, the more (crypto) money is produced, incentivizing ever greater amounts of energy-sucking computational power as the price of Bitcoin skyrockets.
This considerable drawback to what many believe to be the dawn of the cryptocurrency era has created some extremely outspoken opponents and critics of Bitcoin and other e-currency companies. One such naysayer is none other than Bill Gates, who has publicly warned that Bitcoin is bad for climate change. "Bitcoin uses more electricity per transaction than any other method known to mankind,” Gates was quoted by the New York Times last month, before going on to call himself a "Bitcoin skeptic." Gates is not the only high-profile Bitcoin skeptic. Analysts representing the Bank of America wrote in a note on Wednesday the cryptocurrency is "not good news for the environment,” before detailing that "Bitcoin's estimated energy consumption has grown over 200% in the past two years, creating large environmental risks," in no small part thanks to the fact that so much of Bitcoin mining happens in China, where coal is still a massive part of the domestic energy mix. According to the IEA’s most recent data, most of China’s energy is sourced from coal, which accounts for about 58% of the total energy mix.
Proponents of Bitcoin, however, say that Bitcoin is much more eco-friendly than those figures would lead you to believe. A September 2020 report from Cambridge University found that an estimated 39% of the crypto-asset industry’s proof-of-work mining is actually powered by renewable energy, primarily hydroelectric. (We also have China to thank for much of that hydropower). While is this certainly reassuring for many climate-activists-cum-Bitcoin-skeptics, it’s actually a major step down from a previous study that Bitcoin defenders had previously turned to make the claim that 76% of mining was done with renewable sourced energy and which has since been debunked.
Still, 39% is nothing to scoff at, and some Bitcoin advocates say that the cryptocurrency can actually help catalyze the development of new renewable energy technologies in the future by enabling rapid returns on climate-conscious investments. Mike Coyler, CEO of Foundry, one of North America’s biggest cryptocurrency mining companies, told Markets Insider that he believes that Bitcoin can serve as "a bridge between our current energy production and this future world of renewable energy production." He bases this argument on the fact that the rise of renewables, which are by nature variable according to weather patterns and other environmental factors, sometimes leading to energy oversupply. Putting a Bitcoin mining operation next to renewable energy production sites can provide a use for this energy overflow, thereby incentivizing further development of clean energy technologies and infrastructure.
"It allows for a faster payback on those solar projects or wind projects, which means more of them can be built faster in regions where before it was not attractive, because they would produce too much energy for the grid in that area," Coyler was quoted.
If this theory proves to be true, it could have major implications, as a way to take the edge off of crypto’s massive and growing carbon footprint escalates as the cryptocurrency industry continues to go gangbusters. Just this week cryptocurrency Coinbase went public in an IPO that pushed the total cryptoasset exchange market value to a staggering $85.8 billion.
By Haley Zaremba for Oilprice.com
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