Home Business Insights & Advice Bitcoins: Harmful for the environment with massive C02 emissions

Bitcoins: Harmful for the environment with massive C02 emissions

by John Saunders
22nd Dec 20 2:36 pm

The need for specialized hardware and a tremendous amount of electricity to participate in the validation process of Bitcoin blockchain leads to a significant carbon footprint. On calculating, it’s been found that the emission level by Bitcoin is equivalent to the levels produced by the nations of Mongolia and Jordan. We will try to understand the external costs of Bitcoin and the advantages and worth of cryptocurrencies in a debatable manner in this article. To know more about Bitcoin visit https://bitqh.app/.

According to a study, the use of Bitcoin results in the emission of more than 22 megatons of CO2 in a year which is equivalent to the total emissions produced by Vienna and Las Vegas.

An arbitrary computer in the international Bitcoin network (that anybody is free to join), solves a mathematical puzzle for execution and validation of a Bitcoin transfer. Then the puzzle solver is rewarded with a bitcoin.

Bitcoin mining is the term used to define the computing capacity used in the process. It has increased expeditiously in the past few years that has resulted in heightened electricity consumption.

Accordingly, the question that arises is whether Bitcoin is putting an extra burden on the environment?

Why is it important to understand the CO2 emission by bitcoin?

According to speculations, some primary sources of fuel suggested for Bitcoin Network are Ice landing geothermal power Chinese coal and Venezuelan subsidies. Net-zero carbon emissions in the subsequent half of the century are very critical if we want the global warming to remain below 2 percent. The policy-makers need to understand the carbon footprint of cryptocurrency to make the right decisions and take the right calls.

The calculation of Bitcoin carbon footprint is dependent on the geographic footprint and the total power consumption. The amount of emitted carbon in every country is determined by multiplying the power consumption by marginal and average emission factors of the power generation.

On calculating, it is found that the yearly global carbon emissions from Bitcoin come in the range of 23.6-28.8MtCO2. Jordan and Mongolia have a similar ratio.

These calculations of the power consumption by the bitcoin network rely on the hardware that is used for Bitcoin mining. As of November 2018, the yearly electricity consumption for bitcoin mining was about 46TWh.

According to the statistics that have been published, the two largest pools showed that the miners tend to adhere to the pools that are inside or near their native countries. The data suggests that the team has been able to confine 68% of the Bitcoin network computing power in the Asian countries, 17% and 15% in European and North American countries, respectively.

The argument

Some argue that the miners do not continuously operate. However, the common assumption is that the hardware runs non-stop throughout the year.  This assumption has been calculatedly validated for most of the fixed-rate retail tariffs and particularly for the regions that have a high activity of mining.

Cost and benefit to the society

The carbon footprint caused by bitcoin mining indicates that there’s a need to tackle the externalities of the environment. It’s crucial to understand the benefits/ cost trade-off for the blockchain apps in general.

Of course, the blockchain technology provides efficiency gains in some cases. We are not questioning that at all. But, the debate right now focuses on the anticipated advantages, and extra attention is required for the costs. The policymakers must take care of the following aspects for cryptocurrencies with proof of work contract:

1. Carbon

Because the prices of the electricity do not reflect the damage in the future from emissions today, the economic theory suggests that government intervenes and correct the market failure for the betterment of social welfare. Of course, this does not necessarily have to be specific to cryptocurrency. But to decarbonize the economy, regulation of this gambling-driven carbon emission source is need of the hour.

2. Concentration

Looking at the case in hand, it’s clear that it would be foolish to ignore the risk of concentration caused by the bitcoin industry. Regardless of the decentralized structure of bitcoin’s blockchain, 50% of the total hash rate is a result of the four largest Chinese pools, and bitcoin manages three of them.

3. Control

Bitcoin must increase privacy and reduce third party dependencies. Most of the third parties these days serve valuable functions, and a blockchain, being a decentralized socio-economic build up should replace them only if they can guarantee the same functionality.

 

The above information does not constitute any form of advice or recommendation by London Loves Business and is not intended to be relied upon by users in making (or refraining from making) any investment decisions. Appropriate independent advice should be obtained before making any such decision.

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