Bitcoin, also known as cryptocurrency, is a digital currency that is used as a form of money in the virtual space that can be used to purchase goods and services from those service providers who accept Bitcoin. Although this digital currency is worth approximately $1 trillion, it has some serious implications for the earth at large.
Carbon Footprint of Bitcoins
In his interview with the New York Times, Bill Gates, the ex-Microsoft chief, noted “Bitcoin uses more electricity per transaction than any other method known to mankind.” Annually, Bitcoins leave behind a carbon footprint that is roughly equal to the amount released by Slovakia or Mumbai. The amount of greenhouse gases (carbon dioxide in particular) released into the atmosphere due to a specific human activity is called a carbon footprint.
According to Digiconomist, the carbon footprint of Bitcoin is comparable to that of New Zealand which produces 36.95 megatons of carbon dioxide every year. A March 2021 study by a Dutch economist, Alex de Vries, showed that the carbon footprint of Bitcoin per year is 38.10 megatons. Based on “CO2 Emissions from Fuel Combustion (Highlights) 2017,” the annual carbon footprint of Mumbai is 32 megatons and Bengaluru’s is 21.60 megatons.
Ecological impacts of ‘mining’ Bitcoins
Bitcoins are created online through the process of ‘mining’. For this process, high technology computers are used to do complex calculations for hours on end. With a surge in the value of this currency, more people are interested to run heavy power driven machines. But the more these coins are in the market, the longer it takes for new ones to be mined requiring more electricity.
Bitcoin consumed 30 terawatt hours (TWh) of electricity throughout 2017. According to de Vries, the cryptocurrency mining industry now consumes over twice that amount: between 78TWh and 101TWh.
Apart from heavy energy consumption, the mining facilities are mostly based on the regions that are dependent mostly on coal as a power source. The impacts of mining Bitcoins is felt even in other areas of the economy. Due to the COVID-19 pandemic, there has been a shortage in the number of chips available for the purpose of manufacturing Bitcoin mining devices, making the manufacturers spend even more energy on them, given their high value. This has led to a strain on the production of other sectors demanding high power such as Artificial Intelligence, electric vehicles, transportation and home electronics.
De Vries suggests that the lawmakers need to take recognition of the growing implications of the Bitcoin network. Embargoes and prohibitions can be instituted on new mining operations as was done in the case of Québec in Canada. The cryptocurrency industry may be decentralized, but the large scale miners using a lot of electricity can be identified, and they can be banned, or their equipment confiscated.
According to Government sources, the Modi Government is planning to pass a cryptocurrency bill that would impose a ban on the use of cryptocurrency and penalization on miners and traders. The Finance Ministry has however commented that a ‘calibrated approach’ will be taken to deal with the situation which leaves some room for experimentation with blockchain technology.
This article has been written by Ruchira Sarma for The Paradigm
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