A hardhat isn’t required to visit a cryptocurrency mine, but you may need a fan.
Or, as I saw on a visit, some of them.
Though it was hidden in the dark corner of a basement, it must have been well over 80 degrees Fahrenheit. The amount of constant power flowing through the systems was so great that the temperature in the room had risen dramatically.
The windows were covered with heavy curtains to ward off any heat, and numerous fans were also running constantly to prevent overheating.
The value of the cryptocurrency has been a roller coaster ride. It recently hit a record high of $ 63,000 in April but fell below $ 40,000 on Wednesday. Despite the volatility, it is growing in popularity.
However, the most recent hit can be one that is difficult to beat: its green – or the lack of it.
The Cambridge Center for Alternative Finance estimates that Bitcoin (just a popular cryptocurrency) currently consumes 110 terawatt hours per year, or 0.55% of global electricity production.
To put that in perspective, it corresponds to whole countries like Sweden or Malaysia.
Elon Musk made headlines last week after announcing that Tesla had stopped buying vehicles with bitcoins. Musk and his cryptocurrency comment have dominated the headlines, with the prices of Dogecoin and other cryptocurrencies soaring.
Musk had previously helped bolster the validity of crypto when he first announced three months ago that Tesla would accept Bitcoin as a form of payment. In a tweet explaining the reversal, he said, “Cryptocurrency is a good idea on many levels and we believe it has a bright future, but it cannot result in huge environmental costs.”
According to the tweet, Tesla will not accept or trade bitcoins until the mining process is switched to sustainable energy.
Ask a cryptocurrency “expert” – a difficult label since crypto hasn’t existed long enough to have a sufficient track record – and you will get a different answer about its future. Those I spoke to firmly believed that crypto didn’t rely on its current energy-sucking model and most of the coverage of it was riddled with misunderstanding.
In a world where industries are constantly being questioned and pressured to limit their use of non-renewable resources, it is fair to ask whether the crypto industry is consuming too much energy.
But the backers will tell you that this is the wrong question.
This coin seems to have two sides.
So what exactly is the problem?
Understanding the energy problem of crypto starts with understanding how it works – or why the basement I visited was so hot.
Most of Bitcoin’s energy consumption comes from its creation or “mining”. It works on the blockchain, a database that is different from others because it stores data in blocks that are then chained together.
Blockchain can be used for different types of transactions, such as a ledger for transactions. In the case of Bitcoin, the blockchain is decentralized so no one person is in control – all users control it together.
Crypto miners compete to add the newest block to the chain, and they do it by using computers to solve complex math calculations. The more coins that are produced, the more complex these calculations become.
That’s a simplified version of the process, but it explains the need for the room full of computers running 24/7 in the “mine” I saw. It is an energy consuming process. And the increasingly complex transactions require more powerful computers and thus even higher energy consumption.
Seventy percent of this digital mining takes place in China, and Beijing recently took the first step to regulate the process by asking the city’s data centers to report whether they were involved in Bitcoin or any other crypto mining.
How much energy is that exactly?
To say that a monetary system uses as much energy as an entire country certainly sounds alarming – but is it? Crypto investors and miners I spoke to were quick to point out that the information needs to be put in context.
Yes, Bitcoin uses a lot of energy. But it uses less energy than 28 other countries, and many ignore the value of Bitcoin. Ukraine, which is directly above Bitcoin in the energy ranking, has a GDP of $ 150 billion. The value of all Bitcoin mined is $ 940 billion.
The value justifies the energy consumption, according to some crypto advocates. Proponents say it is a small price to pay to escape a centralized monetary system.
The debate about the energy consumption of Bitcoin becomes even more murky and nuanced, if only by using the term “energy” to describe the supposed waste.
After all, energy itself is not synonymous with CO2 emissions as there are many different sources and types of energy that Bitcoin uses, making it difficult to calculate CO2 emissions.
Mining is extremely competitive – the three seasoned miners I was able to speak to have been very protective of their operations and the details of how they work. Since miners are not particularly accommodating, estimates of the carbon footprint from crypto mining are still just educated guesses.
The one mining operation I saw – which has since been shut down – used a large amount of electricity. How much? The miner told me that his highest electricity bill was around $ 500, but that wasn’t enough to negate a profit from the operation. There is no doubt that this person has used enough energy to potentially power their entire block. But as worrying as that may seem, crypto mining needs to be assessed at the macro level for comparison.
One analysis argues that gold mining is 50 times more expensive than digital mining and running the Bitcoin network combined. According to Earthworks, only one gold wedding ring can produce 20 tons of waste at one point.
Another estimate is that 30% of proof of mining work uses renewable energy, mostly hydropower. Crypto has an impact on the environment, but it remains to be seen whether that impact is big enough to force change.
A thing of value
I admit, my eyes went wide and my brow furrowed at the headlines killing Bitcoin’s energy usage. I’ve been suspicious of its sustainability since I came out of a basement sweating and needed a cold drink – mid-January.
At the time, I wasn’t sure if something that still felt so unpredictable and risky was worth the resources. Today is not about the success of Bitcoin. It’s about its worth.
That is the real question that needs to be asked: is the value of the cryptocurrency greater than the environmental impact it has?
Proponents claim the value goes beyond a greener future and opportunity for the average person. By allowing people to seamlessly transfer value, it helps people in low-paying jobs keep more of their wages and bypass capital controls, with some supporters saying that Bitcoin’s transparency makes it more attractive than a traditional bank.
And for those of us who send money to families overseas, Bitcoin can make it easier than trying to meet Western Union’s requirements.
On the other hand, critics say there is still too much unknown about the stability of crypto. Treasury Secretary Janet Yellen said Bitcoin was “an extremely inefficient way to conduct transactions.” She pointed out the energy problem and volatility that could potentially mean huge losses for investors.
Critics have challenged the potential environmental impact of crypto since its inception, but the community has not yet taken any measurable steps to change its protocols.
The task is not that simple.
The currencies don’t have to work according to the current proof-of-work model, but Ethereum, another cryptocurrency, has been trying to move away from the traditional model for years without much luck. And since one of the attractions of Bitcoin is that it is controlled by individuals rather than an institution, experts believe it is unlikely that the change will come without government intervention or incentives.
The crypto industry has taken note of this. An initiative inspired by the Paris Climate Agreement – the Crypto Climate Agreement – has committed to reducing Bitcoin’s carbon footprint.
In fact, Bitcoin could be the incentive some renewable sources need to grow their technology. It wouldn’t be surprising to see Bitcoin and other cryptocurrencies move towards renewable energies like solar power as these sources expand and become more efficient.
The Bitcoin energy debate certainly has two sides. It remains to be seen whether it can regain support from Elon Musk – and the public.