by Mya Chew
This article has an accompanying comic strip: https://www.instagram.com/p/CRyFm_vnKJG/?utm_medium=share_sheet
Bitcoin, Dogecoin and Ethereum have been the hottest topics during the past few months especially in April 2021 when Bitcoin reached an all time high of $63,000 [1]. Many people with the mindset of making quick and easy money have been excitedly trading and investing in cryptocurrency. Even Elon Musk, the founder of Tesla and the second richest man in the world [2], had planned to accept Bitcoin as payment [3]!
The technology behind Bitcoin is called blockchain technology. A requested transaction is broadcasted to the whole network. Network of individual computers then verify the quality of the transaction, and must all come to a consensus before the transaction can proceed. Verified transactions are packaged into blocks. Each block is marked by hashes, which are serial numbers or barcodes. Hashes are created using mathematical formulas and ensure that the contents of the block cannot be changed. As each blockchain transaction goes through, an “inventory” that uses hashes is continuously updated. The chain then becomes an incorruptible history of all transactions [4].
So how is Bitcoin affecting the environment? The damage to the environment comes from the mining of Bitcoin. Bitcoin mining is the process by which new bitcoins are entered into circulation. This requires extremely sophisticated computers that solve very complex math problems [5]. The people who are involved in this process, they are referred to as “miners”, receive bitcoins as their reward.
Cryptocurrency mining farms are commonly set up in places where power is cheapest, most notably northwestern China’s Xinjiang Province [6]. where coal is abundant. These computers consume large amounts of electricity, which is a big problem, especially since burning coal for energy emits lots of carbon emissions. According to the latest calculation from Cambridge university’s Bitcoin’s Electricity Consumption Index, Bitcoin mining uses up 133.68 terawatt hours a year on electricity. To put this into perspective, this places Bitcoin’s mining electricity consumption above the entire country of Sweden [7]! Moreover, because the computers needed to mine Bitcoin are expensive, some miners turn to cheaper computers that are less energy efficient. At this rate, Bitcoin alone could increase global warming past 2 degrees celsius in the next three decades [8]! One top of how much energy Bitcoin consumes, we also cannot ignore the electronic waste created, for the specialised machines used for mining bitcoin burn out easily.
Why has the demand for Bitcoin skyrocketed recently? Firstly, many large payments firms are warming up to the idea of using cryptocurrency. Paypal, for example, now allows customers to buy, hold and sell Bitcoin directly from their Paypal accounts [9]. Secondly, central banks are also starting to embrace cryptocurrency by working on their own Central Bank Digital Currency (CBDC). China, for example, has created a cyber Yuan that is not linked to the dollar-dominated global financial system [10]. Lastly, the economic chaos brought about by the Covid-19 pandemic has caused governments to use aggressive expansionary monetary policy, printing lots of money for their economies. This could very well drive up inflation. Many people have turned to cryptocurrency as a long term hedge against inflation and a volatile international community.
It seems that the demand for Bitcoin and other cryptocurrencies is here to stay. Without quick action to switch to more renewable energy sources, our environment will continue to suffer at the hands of this blockchain technology.
References
- https://www.cnbc.com/2021/04/13/bitcoin-hits-new-all-time-high-above-62000-ahead-of-coinbase-debut.html
- https://www.forbes.com/billionaires/
- https://www.cnbc.com/2021/02/08/tesla-buys-1point5-billion-in-bitcoin.html
- Broader Perspectives, 2018 Year Review
- https://www.investopedia.com/tech/how-does-bitcoin-mining-work/
- https://www.independent.co.uk/climate-change/news/why-bitcoin-bad-environment-mining-b1846911.html
- https://www.ft.com/content/1aecb2db-8f61-427c-a413-3b929291c8ac
- https://www.ft.com/content/1aecb2db-8f61-427c-a413-3b929291c8ac
- https://theconversation.com/bitcoin-why-the-price-has-exploded-and-where-it-goes-from-here-152765
- https://www.wsj.com/articles/china-creates-its-own-digital-currency-a-first-for-major-economy-11617634118
Mya is a recent graduate of Anglo-Chinese School Independent who is passionate about environmentalism. She takes part in many other environment related activities such as starting her own website OurGreenHelpers to educate domestic helpers on sustainability.
