Yesterday, space-mogul and Tesla CEO Elon Musk announced via Twitter that the company will no longer be accepting Bitcoin, due to its negative impact on the environment.
“We are concerned about rapid increasing use of fossil fuels for Bitcoin mining and transactions, especially coal, which has the worst emissions of any fuel”, Musk stated. Bitcoin, currently the world’s largest cryptocurrency, saw its value drop around 5 per cent after his tweet hit the airwaves.
This news might come as a surprise to some. As of February this year, Tesla said it had invested around $1.5 billion in Bitcoin and had big plans to start accepting it as a currency. This whip fast U‑turn begs the question: what’s the real environmental impact of cryptocurrency and what can be done to alleviate it?
As it stands, crypto requires a vast amount of energy for mining. This involves solving complex mathematical equations, which is achieved by a specialised computer software called Application Specific Integrated Circuits (ASIC).
It’s been reported that the energy consumption this requires is comparable to that of entire countries, such as Argentina and Ukraine. Bitcoin produces 36.95 megatons of CO2 annually and, worryingly, it’s currently estimated that Bitcoin alone could increase the earth’s temperature by 2 degrees Celsius within 30 years.
Why don’t Bitcoin and other cryptocurrencies use renewable energy, you ask? The thing is, doing so for mining purposes can be complicated, and it often has to be backed up by fossil fuels due to seasonal and regional variations in availability. Thanks to a legal grey area, digital currencies are not currently taxed or charged on their energy consumption.
According to research compiled by data and media platform CoinDesk, “Bitcoin’s energy-intensive consensus protocol is how the network achieves that consensus and integrity. If consensus were easy to achieve, then the network could be easily attacked. Mining is energy-intensive so that it is prohibitively expensive to attack the Bitcoin network.”
This might go some way to explaining why Bitcoin needs to use so much energy. But how do we tackle the problem?
Check out this table compiled by TRG Datacenters, based in Houston, Texas, which highlights eco-friendly cryptocurrencies based on the amount of energy required to power each transaction.
Other digital currencies such as SolarCoin could even benefit the environment, by rewarding investments in solar energy. Nano, a digital currency network that shuns traditional mining practices in favour of more eco-friendly solutions, is another option. You could also consider investing in XCH, the Chia Network’s cryptocurrency that advertises itself as a green alternative to Bitcoin.
For now, the long-term environmental impact of cryptocurrencies remains to be seen. All we can do is put the pressure on them to come up with eco-friendly mining solutions and, of course, invest wisely.