The most tangible thing about Bitcoin and the 4,000-plus other cryptocurrencies is their terribly large and growing carbon footprint.
Bitcoin is inhibiting the fight against the climate crisis.
The problem keeps getting worse. Every increase in the price of Bitcoin means additional electricity consumption for crypto producers and exchanges when the crypto computer network is started up to meet the increased demand for business and transactions.
And that in turn means even more greenhouse gas (GHG) emissions from the largely coal-fired power plants that run the computer server farms that carry out crypto activities. (Crypto takes its name from cryptology, the math behind secure computer communication.)
The crypto world is largely invisible. Crypto-digital tokens (there are no “coins”, just the imaginations of artists in the news media) consist of lines of computer code. These are created and processed by computers, often in remote locations. And the token dealers are anonymous.
However, cryptocurrencies are tangible in that sense: they now use more electricity than Norway or the entire US government.
And since most of the world’s electricity is still generated from coal, the emissions of which are the main cause of the climate crisis, cryptocurrencies are making our fight against the climate crisis less profitable.
The electrical energy required to manufacture crypto tokens pollutes the atmosphere with about as many greenhouse gases as Argentina.
That estimate is based on today’s total crypto value of around $ 1.7 trillion, an amount roughly equivalent to the Canadian economy, the 10th largest in the world.
Even if Bitcoin doesn’t hit the total value projected by its most ardent promoters of $ 100 trillion, cryptos are well on their way to becoming the biggest energy hog in history.
There are more than 1,000 crypto exchanges with at least 600 providing their services to Canadian crypto traders.
The exchanges use even more electricity. They, too, consist of computer servers working at breakneck speed to solve a multitude of complex math problems in order to unlock the true identities of Bitcoin holders.
The huge carbon footprint issue of cryptos has been overshadowed by the spectacular rise in the price of cryptocurrencies, particularly Bitcoin, which accounts for around 62 percent of all cryptos by value.
Bitcoin has quadrupled in price over the past year. So far this year the price has increased by a further 72 percent.
Crypto has grown so big that it threatens the central banks’ monetary monopoly as a parallel currency system whose participants do not care about global financial stability.
But the office has so far kept its crypto concerns at bay.
After all, the Bitcoin bubble is a subset of our mania-driven pandemic investment era.
However, the cryptocurrency is different. When investment bubbles burst, they stay burst. Not Bitcoin, which staged at least four bubbles and lost 83 percent of its value the last time it collapsed three years ago.
Bitcoin is also described as the most declining form of money ever developed.
Crypto was designed in such a way that it can no longer be found. It’s tailor-made for terrorists, human traffickers, and drug cartels. Because of its notorious price volatility, crypto is useless as a store of value – the first requirement of a currency.
The crypto world is completely unregulated and bypasses central and commercial banks, securities regulators and consumer protection agencies. In its 38-year history, cryptocurrency has never been recognized as an official medium of exchange, although a handful of large companies have started experimenting with it.
There is no recourse for the Bitcoin user whose holdings on a crypto exchange – the only place they are stored – were wiped out in an exchange hacking or malware attack.
And it has recently been shown that crypto, with its huge appetite for computer chips, is also to blame for the current global shortage of semiconductors, which threatens the automotive sector in Ontario, among other things.
In this case, once the technology has been perfected, Bitcoin and other cryptos will either be an exercise of magical thinking among crypto-aficionados or a gateway to a hyper-efficient cashless society of the 21st century.
This is a debate for another time. What is out of the question is the threatening carbon footprint of Crypto.
The world is on a mission to reduce the use of coal.
Crypto miners are looking for coal.
Coal is the cheapest form of energy in large quantities. And for the Energy Pig Crypto miners and exchanges, electricity is one of the biggest costs.
Crypto apologists playfully claim that cryptocurrencies bring fossil fuel manufacturers additional income to make their production more environmentally friendly and to finance alternative energy sources.
The majority of greenhouse gas emissions, however, result from the consumption of fossil fuels and not from their production. Any additional renewable energy should be used to replace fossil fuels, not to sustain it, as Bitcoin proponents would prefer.
Crypto promoters are also trying to turn the tables on the few crypto critics who have recognized the excessive power consumption of crypto. They call the critics hypocrites for not calling other large electricity consumers.
So let’s take a look at the recording.
Large electricity consumers include electric vehicles, which together consume 70.9 terawatt hours (TWhr) of electricity per year.
Then there is Google (10 TWhr), Microsoft (9.2), Facebook (3.2), Apple (1.3) and Netflix (0.45).
But Bitcoin alone, apart from the thousands of other cryptos, consumes an estimated 439 TWhr of electricity per year.
And the other big power users offer useful services. Crypto does not produce a social good. Its users are an elite club that has the opportunity to place high risk bets in the hopes of scooping a quick megabuck. They offer society nothing but a major obstacle to solving the climate crisis.
There are signs that the crypto world will soon be contained.
Crypto miners in Washington State, New York State, Iran and Inner Mongolia, who account for around eight percent of the crypto world’s electricity consumption due to their lack of electricity alone, have been subject to restrictions or bans citing a lack of electricity for households and industry Abundance of cheap coal power.
Beijing recently told the region’s crypto miners to pack and go. Hydro-Québec, its cheap hydropower production capacity under pressure from crypto miners, is considering similar measures.
In the meantime, central bankers unwilling to give up their monetary monopoly are planning their own cyber currencies.
The People’s Bank of China has already introduced a digital currency. And Janet Yellen, the US Treasury Secretary and former chairman of the US Federal Reserve Board, is considering a government-issued “digital dollar” that could lead to “faster, safer, cheaper payments.”
Where bitcoin is left is nowhere else except with those who continue to use it to avoid their activities being discovered.
But government-sponsored cyber currencies would not reduce the carbon footprint. In fact, as digital currency replaces traditional ones, they would make it a lot bigger.
We can only hope that further technological breakthroughs will reduce cryptocurrencies’ voracious appetite for power.
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