How Bitcoin Affects the Environment
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Bitcoin first gained popularity as a means of exchange, and eventually ended up drawing in investors who started to speculate against its price changes. While organizations worked to develop Bitcoin’s financial instruments, investors used it as a way to store value, fuel economic growth, and protect against inflation. With the development of bitcoin, people from all over the world now have access to a decentralized currency that isn't subject to price manipulation by the state. Although many investors were optimistic on bitcoin, many also contend that it is having negative environmental effects and using excessive amounts of electricity.
It begs the question: What impact does crypto have on the environment? Mining cryptocurrencies consumes a lot of energy. Mining is one of the ways to confirm cryptocurrency transactions and create new crypto, but it's also the way many cryptocurrencies, including the two most popular ones- Bitcoin and Ethereum- are created. Since there is no direct way to calculate it, the estimated energy consumption of Bitcoin and cryptocurrency mining is approximately 150 terawatt-hours of electricity annually, according to the Cambridge University Bitcoin Electricity Index. Due to the estimated 65 megatons of carbon dioxide that are emitted into the atmosphere each year from the production of that energy, cryptocurrency plays a significant role in both global air pollution and climate change. To put that into context, the electricity consumption of the Bitcoin network is comparable to that of Washington State every year. It is difficult to determine the carbon footprint of cryptocurrencies. Although the majority of the nations where cryptocurrencies are mined use fossil fuels as their main energy source, miners must look for the most affordable energy sources in order to stay profitable. That frequently entails utilizing fresh alternative energy installations.
The majority of Bitcoin mining, according to researchers at the University of Cambridge, takes place in Kazakhstan, China, and the United States. Around 2/3 of the world's Bitcoin was mined in China in 2020, using around 86 terawatt hours (TWh) of electricity, 63% of which came from coal-fired plants, according to Rystad Energy. In the United States, mining accounts for about 38% of all mining. According to EIA data from as recent as February 2022 , the majority of the U.S.'s electricity is produced by burning fossil fuels. 13% of the world's Bitcoins are mined in Kazakhstan, which also primarily employs fossil fuels. As a result, three nations, wholly reliant on fossil fuels, are in charge of about 72% of global Bitcoin mining.
As older mining equipment quickly becomes outdated, crypto miners have to upgrade their systems which also contributes to the production of significant amounts of electronic waste. This is especially true for miners that use Application-Specific Integrated Circuit (ASIC) technology, which is designed for the sole purpose of mining cryptocurrencies that are created through proof of work. Today, in order to prevent the constantly running hardware from overheating, you need highly specialized machines, a lot of money, a large space and adequate cooling power. Because of this, mining now takes place in sizable data centers that are owned by businesses or groups of individuals. In reality, the network's computing power is now owned by seven mining groups, accounting for close to 80% of all operations.
Mining takes place all over the world and more frequently in areas with a plentiful supply of cheap energy. A significant portion of Bitcoin mining has historically taken place in China, but recently, sanctions have been imposed. According to the researchers of the University of Cambridge who have been monitoring Bitcoin mining, China's share of the world market fell from 75% in late 2019 to 46% in April. At the same time, the United States' percentage of mining increased from 4% to 16%.
Various approaches that will be more environmentally friendly have been proposed, in which processing transactions is obtained not through computational work but rather by proving ownership of enough coins. This approach would be more effective, but hasn't been tested on a large scale. Since many people have made huge investments in mining, it will be challenging to implement such a significant change. Governmental processes are slow, and the crypto industry is growing quickly. What was supposed to be a futuristic digital currency already has an impact on the real world, and further changes should be expected.
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