Bitcoin mining consumes as much energy as everyone in Finland.
In May, Elon Musk announced that his Tesla company was refusing to accept bitcoins as payment for a car due to the negative impact of cryptocurrency on the environment. A month later, the entrepreneur announced that it is possible to buy an electric car for bitcoins, however, provided that the cryptocurrency will be at least 50% produced from "green" energy. The problem of the negative impact of bitcoins on the environment oppresses many supporters of digital currencies. Let's figure out what is the essence of this negative impact and what ways to fix the situation.
We look further. Energy produced by burning fossil fuels releases greenhouse gases into the atmosphere, which is fraught with climate change. Therefore, mining in terms of its impact on the environment can be compared to the oil industry. According to the University of Cambridge Bitcoin Electricity Consumption Index, the global bitcoin network uses about 80 terawatt hours of electricity annually, which is equal to what everyone in Finland uses.
The switch to renewable energy is seen as a way to minimize Bitcoin's negative impact on the atmosphere. However, this is not a novelty. This has already been practiced in China, using hydropower for mining. But since the local government has banned the mining of cryptocurrencies, many miners travel to Texas. Experts fear that this could significantly worsen the situation, since Texas accounts for the largest share of electricity from fossil fuels in the United States. There is a pattern: the higher the price of bitcoin, the more energy is required to mine it. Therefore, the question arises: how to encourage the mining of the crypt environmentally?
An alternative to "dirty" bitcoin can be the second most popular cryptocurrency - ether (Ethereum). The Ethereum Foundation announced in May that the cryptocurrency is moving to a new method of recording and verifying transactions that will reduce energy consumption by 99.95%. Ethereum 2.0 provides a Proof of Stake approach - proof of ownership. Rewards for signing a transaction are received not by miners, but by validators who have a certain amount of cryptocurrency in their wallet. In fact, the algorithm for confirming a block in the chain is more likely to choose an account with a large account balance. However, the transition to the new method will not take place earlier than 2022, experts say.
In May, Elon Musk announced that his Tesla company was refusing to accept bitcoins as payment for a car due to the negative impact of cryptocurrency on the environment. A month later, the entrepreneur announced that it is possible to buy an electric car for bitcoins, however, provided that the cryptocurrency will be at least 50% produced from "green" energy. The problem of the negative impact of bitcoins on the environment oppresses many supporters of digital currencies. Let's figure out what is the essence of this negative impact and what ways to fix the situation.
Energy-intensive mining
The main problem with Bitcoin is the sheer amount of energy used to mine it. The miner's task is to verify transactions on the blockchain to prevent fraud. As a reward, he receives new bitcoins. During the verification process - essentially by trial and error - the miners solve the most complex mathematical problems. This requires a lot of computing power and, accordingly, electricity. The latter is a product of fossil fuels.We look further. Energy produced by burning fossil fuels releases greenhouse gases into the atmosphere, which is fraught with climate change. Therefore, mining in terms of its impact on the environment can be compared to the oil industry. According to the University of Cambridge Bitcoin Electricity Consumption Index, the global bitcoin network uses about 80 terawatt hours of electricity annually, which is equal to what everyone in Finland uses.
The switch to renewable energy is seen as a way to minimize Bitcoin's negative impact on the atmosphere. However, this is not a novelty. This has already been practiced in China, using hydropower for mining. But since the local government has banned the mining of cryptocurrencies, many miners travel to Texas. Experts fear that this could significantly worsen the situation, since Texas accounts for the largest share of electricity from fossil fuels in the United States. There is a pattern: the higher the price of bitcoin, the more energy is required to mine it. Therefore, the question arises: how to encourage the mining of the crypt environmentally?
Carbon tax as a compulsion to become eco-friendly
One of the ways to motivate the use of renewable energy sources in bitcoin mining is through the introduction of a carbon tax. In doing so, the Protocol on Greenhouse Gases, which is the international accounting standard for tracking such emissions from the public and private sectors, can be used. However, the tax can make mining less attractive and pull the price of cryptocurrency downward. On the other hand, the question arises: is it appropriate to levy a carbon tax on bitcoin if there are many other industries with far more carbon emissions?Carbon credits
Carbon credits represent a government-sanctioned ability to release a specified amount of carbon into the environment. In addition, companies can sell allowances to other firms with a large carbon footprint. In the case of cryptocurrency mining, this could mean that a miner is buying carbon credits from another company to offset their emissions. It can also stimulate him to switch to greener energy in order to profit from the sale of his loans.Ethereum 2.0
Bitcoin's carbon footprint follows from its decentralized structure. Many miners compete to solve the math problem needed to validate and secure transactions. The fastest computer not only confirms the transaction, but also receives a small reward. Over time, math puzzles become more complex as more people compete to solve them. More computers are joining the battle, pouring vast amounts of computing and electrical energy into the ecosystem.An alternative to "dirty" bitcoin can be the second most popular cryptocurrency - ether (Ethereum). The Ethereum Foundation announced in May that the cryptocurrency is moving to a new method of recording and verifying transactions that will reduce energy consumption by 99.95%. Ethereum 2.0 provides a Proof of Stake approach - proof of ownership. Rewards for signing a transaction are received not by miners, but by validators who have a certain amount of cryptocurrency in their wallet. In fact, the algorithm for confirming a block in the chain is more likely to choose an account with a large account balance. However, the transition to the new method will not take place earlier than 2022, experts say.
