[News] Bitcoin’s High Comes With Even Higher Carbon Footprint

[G R 4 V E N ⵣ]

 

As investors and companies shift their focus to sustainability and climate change, the massive carbon footprint left behind by cryptocurrencies risks becoming a red flag—specifically that of Bitcoin.

 
Research has shown that cryptocurrency will consume just as much energy as all the data centers worldwide. The renewed surge of Bitcoin’s price since the beginning of 2021, could result in it having a carbon footprint comparable to that emitted by all of Argentina or New Zealand.

With companies such as Tesla and individual stakeholders racing to stock up on the cryptocurrency, the digital token has become a precious commodity as the average Bitcoin transaction is worth about $16,000 in comparison to the $46.37 worth of a Visa transaction.

According to the Digiconimist, one Bitcoin transaction is the “equivalent to the carbon footprint of 735,121 Visa transactions or 55,280 hours of watching YouTube,” leading to the creation of a Bitcoin Energy Consumption Index, created by Dutch economist Alex de Vries. The index is a systematic attempt to calculate the energy use of the Bitcoin network. 

In a nutshell, bitcoins are made by “mining” coins which are produced by computers that carry out complex calculations. There is a positive correlation between the number of bitcoins created and the time it takes to mine new ones. The more bitcoins mined, the more electricity used. 

De Vries estimates that around 60% of the Bitcoin mining cost is devoted to the amount of electricity used. Nonetheless, the economist explains that in cryptocurrency, energy use lags behind as it takes more time for miners to get their hands on new hardware. 

Without a doubt, this is expected to lead to a substantial increase in energy use in the short term due to Bitcoin’s recent price surge and as a result, established miners are expected to further invest in hardware to expedite the process.

Bitcoin’s value is continuing to increase and so are its investors in corporate America, entailing a market cap of more than $1 trillion as its price is above $54,000. However, skeptics alongside Bill Gates are seriously concerned and are questioning whether it’s worth the huge environmental cost. 

Bill Gates proclaimed that “Bitcoin uses more electricity per transaction than any other method known to humankind”, adding, “it’s not a great climate thing.” 

This undoubtedly raises a crucial question that several companies are battling to determine: Is Bitcoin’s success threatened by the movement of stakeholders and investors, who are lenient towards investing in companies that prioritize social, environmental, and governance matters?

Large companies such as BlackRock, the largest money manager in the world, have announced that their investments will be evaluated predominantly on the basis of how they intend to meet the climate challenge. More importantly, investors are increasingly calling upon the companies to fully disclose their carbon footprint as global standards are starting to be set. 

Other companies, such as Jack Dorsey’s Square and Elon Musk’s Tesla, which have heavily invested in Bitcoin, would then be faced with questions on how their Bitcoin holdings could affect their respective sustainability scores. This is especially true since Tesla’s essential premise is to contribute to the reduction of climate change through lowering carbon emissions.