Bitcoin, and all cryptocurrencies in general, have been faced with a lot of opposition over the years since their existence.
Now the question arises: Are these claims against Bitcoin's environmental impact inflated to limit its adoption?
An estimated 114 million wallets hold Bitcoin worldwide and this number is expected to keep increasing. However, this increase is accompanied by an increase in the use of nonrenewable energy sources.
This serves as a new point for adversity against the use of cryptocurrencies. Nonetheless, data from Bitcoin advocates say that the traditional banking system produces more than five times the energy emissions from Bitcoin.
This article goes into detail about all you need to know about the environmental impact of bitcoin. This is from where the main problem arises to how this problem compares to traditional banking systems, among others. Let’s get right in.
The Genesis Of Bitcoin’s Energy Emission Problem
Bitcoin runs on blockchain technology, which is in turn, powered by distributed ledger technology (DLT) and this grants it a whole lot of advantages over legacy systems.
There are multiple ledgers holding details of every transaction going on in a network of participants. These ledgers serve as “Proof of Work (PoW)” and ensure that fraudulently modifying transaction details is impossible.
Additionally, ledgers are distributed across multiple computing devices across the globe, with these devices owned by individuals called “miners”. Miners lend their computing devices to the network to ensure this PoW system remains running in exchange for rewards in Bitcoin (6.25 BTC to be exact).
However, there is a catch. In the current mining ecosystem, miners can only use very powerful computers to mine and verify bitcoin transactions. The more powerful the system is, the better the chance of successfully mining and solving complex mathematical puzzles.
This has led to the use of multiple energy-consuming devices by even a single individual. What’s more, the previous fortunes or expected fortunes in Bitcoin price jumps have led more miners into this ecosystem.
The effect? Power consumption currently totals 129 terawatt-hours (129TWh) annually.
So how does this compare to traditional power consumption data?
To start with, Bitcoin uses enough annual energy to power US households for more than two years. It uses more energy than almost half of the African population (667.9 million) and more energy than 163 countries worldwide.
Of course, these numbers are massive, to say the least. Nonetheless, another picture needs to be painted.
Bitcoin Environmental Impact vs Banking
Bitcoin is a product and tool of a decentralized financial system. This DeFi system serves as an alternative to traditional financial institutions and banking isn't exempted.
The traditional banking sector makes use of over 700TWh of energy annually. This is over five times the energy consumption from bitcoin mining.
Energy consumption isn't the only area of comparison when it comes to environmental impact. Carbon dioxide (CO2) emissions also come into play.
Bitcoin produces about 70 million metric tonnes (70 MMT) of CO2 emissions annually. Traditional banking, on the other hand, produces five times this; a massive 400MMT of CO2 annually to be exact.
Although Bitcoin emissions are feared to produce up to 111MMT, this is only 0.35% of the total worldwide MMT emissions.
Now, we see adversaries against the adoption of Bitcoin are making claims that could be called somewhat unjustifiable. And there is more.
Traditional Banking Has Apparent Faults, Bitcoin Is Getting Cleaner
The traditional system is faced with certain problems that have been further exposed by the conflict in Ukraine. Bitcoin and other cryptocurrencies have then been the savior of many individuals on both sides of the war.
Fleeing Ukrainians that have bitcoin still have access to their finances. This cannot be said for individuals that only have fiat currencies deposited in and controlled by banks.
On the other side, Russians who have been cut out from international financial systems have found solace in the use of bitcoin. The Russian Rubble is converted to Bitcoin and used to make international transactions without discrimination.
This shows that Bitcoin and other cryptocurrencies can't be done away with, no matter how much opposition they get.
Thankfully, countries and mining institutions around the globe are implementing measures against Bitcoin's environmental impacts.
China has expelled crypto mining activities from its territory. It had been a hub for environmentally-damaging mining activities due to its large deposits of coal.
This expulsion has led miners to seek new sources of energy in jurisdictions with stringent environmental protection laws. Currently, coal-sourced energy constitutes 35% of total energy consumption, dropping from a previous 50%. Other sources include renewable sources, gas, oil, and nuclear power.
Mining companies like ARK Invest and Argo Blockchain (the biggest mining organization in the UK) have proposed the use of solar and carbon-neutral sources to support this continuously growing mining ecosystem.
The US is at the top of mining hubs and an increasing number of countries are adopting environmental, social, and governance (ESG) requirements.
As a top stakeholder in the mining ecosystem, the US is also engaged in continuous talks with other stakeholders to further deplete Bitcoin’s energy and carbon footprint. Joe Biden, the US President, has given orders for a study to be made into the environmental impacts of cryptocurrencies. This is to be carried out by the Environmental Protection Agency (EPA) and Office of Science and Technology Policy (OSTS).
What Do All These Mean For Bitcoin?
From the above data, we see the main narrative around Bitcoin's environmental impact debunked. Traditional banking causes way more environmental impact than Bitcoin mining and cryptocurrencies have become rather indispensable.
Instead, BPC environmental impacts from Bitcoin are currently on a downturn and expected to continue like this for more years to come.
Environmental impacts are not denied here but comparatively lower than what adversaries have painted over the years. Hopefully, solutions to completely eliminate negative energy and carbon footprints from the mining ecosystem are achieved soon.