Bitcoin is primarily regarded as an investment vehicle that can make or lose fortunes in a market where price fluctuations are commonplace. There are several ways to get your hands on digital assets built on the blockchain, but the best way to buy Bitcoin is via an exchange, as it offers security features and storage options. The environmental impact of Bitcoin (and other cryptocurrencies) is nowadays still a strong matter of debate, with opinions both for and against it. Bitcoin’s ecological footprint is abstruse and complex, so there’s a need for independent data to inform decision-making. We don’t need to eliminate the use of Bitcoin, yet we need to change how it’s validated.
So, Is Bitcoin the Environmental Catastrophe Depicted by Others?
In April this year, the New York Times told its readers “Bitcoin mines cash in on electricity – by devouring it, selling it, even turning it off – and they cause immense pollution.” Needless to say, the claim seems credible to the vast majority of people, even cryptocurrency enthusiasts, concerned about the tremendous amount of electricity used in generating tokens. On the corner of New York’s Park Avenue and 52nd Street, bystanders stop in front of the Skull of Satoshi, a thought-provoking art installation created by Benjamin Von Wong and Greenpeace USA to draw attention to Bitcoin’s climate destruction.
Not that long ago, the European Union proposed a ban on Bitcoin mining across the bloc to protect consumers and make operations more sustainable. Members of the European Parliament voted against the ban on proof-of-work cryptocurrencies, but a weaker version of the legislation could move forward. The Markets in Crypto Assets (MiCA) regulation has just been approved and is set to come into force in 2025, forcing crypto projects to disclose the carbon footprint associated with an asset, so it will be an integral part of its overall risk strategy. Additional capital requirements could be imposed on engagement with digital assets with a great carbon footprint.
Anyone unfamiliar with the design and purpose of blockchain technology, it’s becoming more challenging to support Bitcoin without silencing your environmental conscience. In spite of everything, Bitcoin isn’t the ecological catastrophe depicted by others. Indeed, computing power is central to the success of Bitcoin, but the value of its electricity costs isn’t different from that of payment networks such as Visa or Mastercard. It’s normal for society to be skeptical, but they should guide their opinions and decisions with accurate, unequivocal facts. It’s often argued that Bitcoin operations use more electricity than the entire country of Argentina. This claim is false because it’s based on an incorrect assumption about how mining works.
Renewable Energy Sources Account for The Electricity Used to Mine Bitcoin
Mining is the process by which new Bitcoins are created, performed using sophisticated software to solve complex math problems. When a correct solution is produced, a reward in the shape of Bitcoin and fees are offered to the miner who first presented the solution. Miners basically race against one another to solve the equation using computers capable of generating billions of hashes per second. Proof of Work is energy-intensive by design, but an ever-increasing number of Bitcoin miners are turning to renewable energy sources like solar, wind, and hydropower rather than coal or natural gas. This requires load balancing, energy swaps, hybrid systems, and battery storage, to name a few.
Miners can turn on or off their power consumption as needed, usually in a matter of minutes. This translates into the fact that they can absorb the excess capacity that sets apart renewable energy generators, stabilizing the grid and reducing waste. As the world continues to transition to green energy, Bitcoin could play a role in grid stabilization and eliminating waste arising from end-of-life clean energy infrastructure. There’s no technical obstacle to transitioning to Proof of Stake, but Bitcoin can’t make the switch alone. Many within the community reject the idea that Proof of Stake can be more decentralized over the long term.
Bitcoin Could Generate Monetary and Environmental Benefits
For some time now, the greatest mathematical minds have attempted to scrutinize cryptography and cryptographic hashing – none of them have found a flaw in blockchain technology. Therefore, we can assume the algorithmic functions are mathematically pure. We can’t judge the cost of Bitcoin until we identify and agree on the facts. As mentioned earlier, efforts are afoot to introduce innovations into the network to increase its sustainability. Take, for example, the Lightning Node, which uses micropayments to handle transactions more efficiently and cheaply. Even a supposedly exorbitant cost still has a massive return on the investment.
Bitcoin helps the world move away from a time when governments control (and even manipulate) the money supply towards a time when money is a personal, incorruptible asset. There are numerous redundant copies on the database, so no one can seize the tokens. Many argue there’s no way to implement a taxation system, but that’s up for debate; in most countries, cryptocurrency is subject to income tax or capital gains tax. As long as Bitcoin users don’t disclose their wallet addresses, it’s impossible to trace the transactions back to them. The blockchain is transparent, but it’s hard, if not impossible, to read.
Bitcoin could generate environmental benefits by incentivizing the use of energy that is better for the environment, so it might be an effective tool for a low-emissions future. Wind farms aren’t able to sell their energy due to their remote locations and the absence of transmission lines, so if a crypto mining company were located nearby, they would generate revenue right away. Bitcoin miners have been encouraged to move to Texas, where there is excess capacity from wind projects; the additional revenue could help producers lower costs to consumers and support grid upgrades. Miners could leverage stranded methane, turning it into electricity – it can be converted into methanol.
Sometimes, Bitcoin’s behavior can fall short of expectations, but it’s never acceptable to make unsubstantiated allegations. For the time being, there’s insufficient evidence to prove Bitcoin is bad for the environment. Actually, the exact opposite may be true.