Bitcoin has hit the headlines a lot recently as its value has skyrocketed, exceeding $60,000 just a few days ago. As of today, 1 bitcoin is worth $54,842.30 (£39,445.60) so it has dropped in recent days but it is still incredibly valuable. Since it was created in 2009 by someone under the pseudonym Satoshi Nakamoto, bitcoin has exploded in value and people that invested in the very early days have very quickly become millionaires, or even billionaires.
If you have no idea what bitcoin is don’t worry, its taken a lot of time and research for me to understand and to be honest I’m not totally sure I understand still, but here’s my attempt anyway.
Bitcoin is a decentralised digital currency, or cryptocurrency. It doesn’t require a bank or central institution to operate and it doesn’t physically exist – its all online. Balances of bitcoin are kept on an online ledger that everyone can see making it very transparent; nobody can cheat the system and attacks against owners of the currency are almost impossible. The transparency also means there’s a trail that can be followed should bitcoin be used illegally.
Where it is possible to print an unlimited amount of money with all physical currencies, the same isn’t possible with bitcoin. There can only ever be 21 million bitcoins in circulation – once they have all been mined (we’ll get to that shortly) that’s it. Right now there are just over 18 million in circulation, so less than 3 million left to mine, which along with the popularity of the currency may go some way to explaining the current value of bitcoin.
Transactions of bitcoin rely on something called Blockchain. Blockchain technology is used beyond bitcoin but that’s another blog entirely. All it is is a chain of discrete information in blocks, as the name suggests. The blocks are ordered chronologically in the chain and could realistically contain any kind of information, but in the case of bitcoin it would be transactions.
In order to get bitcoin, it needs to be mined. In order to mine it, you need a computer to solve a series of complex maths problems. Once they’re solved, the miner is rewarded with bitcoin. When bitcoin was first created, a desktop computer would likely have been enough to mine bitcoin as the maths problems that needed to be solved weren’t as complex as those being solved now. To understand just how complex these maths problems have become, if you imagine the difficulty of the first algorithm that was solved to mine bitcoin as 1, the current difficulty of algorithms is 16 trillion!
As more bitcoin is mined, the amount that miners receive decreases and has done so every four years or so (its dependent on the number of blocks in the blockchain. In 2009, those who mined bitcoin would earn 50 bitcoins when they solved a problem. In 2013 that was down to 25, 2018 saw it drop to 12.5 and in May 2020 it dropped to 6.25. This will keep halving until around 2140 (according to the Bitcoin halving countdown) when those who have been mining bitcoin will receive fees based on processing transactions to keep the currency going.
So, without going into detail, hopefully that made sense but sites like Investopedia have much more in depth explanations for those who are interested!
As many emissions as the City of London
So, how does mining for a cryptocurrency that gets rid of the need of a centralised bank having such a big impact on the environment? The answer to that relates to the computing power required to mine Bitcoin. When the idea of Bitcoin was first created back in 2009, the computing power required to mine for Bitcoin was relatively tiny – it could be done on a personal computer. Fast forward to 2017 and the energy required to mine Bitcoin was estimated to be equal to the whole of the Republic of Ireland (around 30 terawatt hours).
The increased difficulty in maths problems that are required to obtain bitcoins mean that more and more computing power is required. Although there is yet to be an exact value on just how much electricity mining for bitcoin is consuming, its estimated to be more than 121 terawatt-hours annually, which is similar to the amount of electricity consumed by Argentina – a country with a population of around 45 million people.
The production of greenhouse gas emissions that come with generating electricity from fossil fuels are the environmental issue with mining for bitcoin. Miners will often choose to locate in areas where the cost of electricity is cheapest. Unfortunately, with the help of government subsidies, that’s coal in China – more than 65% of all bitcoin mined is in China, massively dwarfing any other country. Only USA (7.24%), Russia (6.90%), Kazakhstan (6.17%), Malaysia (4.33%) and Iran (3.82%) are mining more than a single percent of the global total and all of these countries have one important thing in common, producing and subsidising fossil fuels for electricity.
Of course, some of that electricity may be produced by renewable sources of energy – USA produces just over 11% of its energy from renewables and China is at almost 30, although that does include biomass as renewable. However, the way some of these countries still produce and subsidise fossil fuels on such a large scale are why they’re so attractive to bitcoin mining operations and will continue to be as the electricity demand increases with the complexity.
This isn’t even touching on the amount of e-waste produced by the advanced computer systems that are built specifically to mine bitcoin. As problems become more complex and hardware required to mine bitcoin reaches the end of its life (about a year and a half), new hardware is required and what’s thrown out cannot be repurposed due its singular use. This e-waste is then either incinerated, often producing toxic chemicals and gases, or sent to less developed countries where it ends up in unregulated landfills.
In the same way the electricity usage can be compared to countries, so can the amount of waste produced. Annually, e-waste produced from bitcoin mining is just less than Luxembourg and about half of what Latvia produces. The amount of e-waste produced per transaction is also much higher than credit/debit card transactions. In fact, one bitcoin transaction has a e-waste footprint double that of 10,000 visa transactions!
Can Bitcoin be ‘green’?
There’s nothing to say that mining for bitcoin can’t be more environmentally-friendly and be powered on renewable energy, it absolutely can. However, the demand for electricity and the source of this electricity to mine the remaining Bitcoin should rightfully be a cause for concern at a time when we need to be reducing carbon emissions. The amount of non-recyclable e-waste produced by the short lifespans of hardware and the need for more efficient technology are also a major issue that is yet to be addressed too.
If bitcoin is to take-off as many in silicon valley want it to, these issues must be addressed urgently. There are a number of small-scale bitcoin mining operations that are looking at becoming more sustainable in regards to the electricity required and the heat produced which, whilst small-scale, are a good start.
The computer power required to solve these increasingly complex maths problems generates a lot of heat. This is a similar issue for any server room with a lot of computer power, which is why the rooms that house these computers are fitted with cooling systems that will regulate temperature and keep it cool. A Canadian startup has used the heat produced by computers to raise 800 cold-water fish and grow plants like basil and lettuce in a more sustainable way.
In a country like Iceland which, thanks to geothermal and hydroelectric energy sources, is almost completely powered by renewable energy, mining for bitcoin has very little environmental impact. The naturally cold temperatures mean that cooling systems are only required in their full capacity during summer months. The Moonlite Project has constructed a data centre capable of mining for bitcoin that will be run entirely on renewable energy and at a low cost.
These are just two examples of how mining for bitcoin can become ‘green’, but making all bitcoin mining a green process is very, very far from becoming anything more than a dream. The vast majority of bitcoin is mined using electricity powered by fossil fuels and there’s not much sign of that changing without massive change in the countries where the majority of mining is taking place. Until production of fossil fuels drops and the subsidisation of these dirty fuels stops in every country around the world, they will remain the cheapest type of fuel and so continually used by miners. On top of that, the growing amount of e-waste is a much more difficult challenge to solve. Even though the waste produced is rarely considered in the same way that the sources of electricity are, it’s arguably an even bigger challenge to bitcoin’s green credentials, and will only become a greater problem moving forward.
You can argue that with bitcoin existing as a digital currency, you negate the need for physical money. Metals aren’t required for the creation of coins and there’s no need to print paper money – there’s no denial that there are positives of a secure, online way of making monetary transactions in an increasingly online world. However, there are still a lot of downsides, particularly in relation to the environment, raising the question of whether bitcoin will ever be a truly viable.