Bitcoin, given its immutable features, has been edging towards mainstream acceptance with industry players, institutions, and individuals having their distinct visions of what they expect from hard money. The recently concluded B-summit had names like Jack Dorsey, Elon Musk, and Cathie Wood mooting over the possibilities of Bitcoin adoption. Elon Musk confirmed once again that Tesla might, after all, start accepting Bitcoin as payment, reversing his prior concerns over the carbon footprint left by BTC mining.
The names in the Bitcoin league keep on increasing as environmental critiques continue to raise their concerns. The green Bitcoin debate becomes even more pertinent in light of bitcoin’s adaptation to the ‘will of old monied institutions’ as its next phase of evolution.
Bitcoin’s Energy Intensive Mining Concerns
Bitcoin mining based on Proof-of-Work consensus requires huge computational power involving powerful ASICs (Application Specific Integrated Circuits). These ASICs soak large amounts of energy, often coal-powered. Miners irrationally incentivize energy waste and are always on the lookout for cheaper sources of energy. Before the Chinese crackdown, almost 65% of the mining facilities were concentrated in the Chinese regions powered majorly by coal and by hydropower to some extent. A Cambridge study estimated BTC’s yearly energy consumption of 121TWH to be equivalent to that consumed by Argentina annually.
As BTC prices soar further, more and more miners would be competing to mine the same Bitcoin, adding further to the ever-increasing carbon footprint. Moreover, the increasing level of difficulty in the problems required to validate BTCs means that more computing power would be required to solve the same. Added to this are the problems of e-waste generation and disposal. With each shift in BTC’s mining technology, the e-waste produced is a little less than what Luxembourg produces annually.
Even if Bitcoin miners pursue green energy sources to cut carbon emissions, analysts argue that BTC would be cutting into the renewable energy share of other prominent sectors and industries. As such, the dichotomy continues to persist and BTC bifurcations have arisen in the crypto sphere, where a BTC mined from renewables is called Green Bitcoin, and the one mined from non-renewables is called Blood Bitcoin.
The Green Bitcoin vs. Blood Bitcoin isn’t even a relevant debate as it is not possible to precisely mark a particular token as green once it enters cold storage post its generation as a reward. Cryptocurrencies are known for their 100% fungibility. Allotting them specific traits would defeat the very purpose of Bitcoin.
Will there be a Fragmentation of the Bitcoin Market?
Only 10% of the investors who are keen on investing in Bitcoin have done so, owing to the ESG(Environmental, Sustainability, and Governance) concerns of Bitcoin mining. There are known names such as MicroStrategy and BlackRock openly embracing Bitcoin while entirely disregarding the ESG concerns on one hand. Startup firms like Square and Seetee have taken up the initiative to adopt sustainable Bitcoin practices seeking ‘stranded or intermittent energy’ sources on the other hand.
As green energy mandates become a reality in the wake of Bitcoin’s mainstream adoption in the near future, chances of a bifurcation- a white and black market for coins that are compliant and coins that are not, might erupt in the crypto markets. An earlier FATF discussion talked of such a hypothetical scenario. Right now, we can safely conclude its veracity to be as sound as the 2012 Armageddon.
Does the Current Stature Pose Double Standards for BTC?
A 2018 analysis revealed that in the U.S. alone, video gaming accounted for 12 million tons of CO2 annually, which is one-third of what Bitcoin mining produces globally every year. No doubt, BTC’s mining process is innately an energy-hungry process rewarding energy waste. But the growing number of organizations that are looking at probable ways to clean the mining process testifies their novel intention to actually bring forth an alternative solution in Bitcoin in the greenest way possible.
If we look at the bigger picture, have we ever realized how much energy is consumed each time we swipe our credit cards or buy apparel of the latest fad? (Apparel industry is the second-most polluting industry in the world!).
Take, for instance, remarks from Brannin McBee, co-founder of CoreWeave whose cloud computing business firm mines GPU-based cryptocurrencies from its idle capacity. McBee says that he has never encountered a customer concerned about the environmental repercussions of his cloud computing business. For him, it’s the double standard that’s there for crypto but not for others. Moreover, it is justifiable to measure the utilities a technology generates to the energy it consumes.
Is Bitcoin an empty technology when we see governments across the globe sanctioning BTC payments and opportuning at the probability of their own CBDC?
What is the BTC Community Doing to Solve the Case?
Three years back, a joke of a whitepaper named ‘Centralised Bitcoin: A Secure and High-Performance Cash System’ from a so-called widow of Satoshi Nakamoto was circulating on the internet. It claimed to reduce bitcoin energy consumption by 99.9999999947853% via a single server taking care of the same volume of transactions as the entire Bitcoin network. The solution suggested is entirely feasible, however, it could jeopardize the very nature of Bitcoin.
On a serious note, the foremost initiative has come from the CCA (Crypto Climate Accord), a body founded by cryptocurrency firms, producers of renewables, and a crypto-friendly environmentalist group. The CCA aims to make all cryptos ‘greener’ by using a combination of technology improvements in mining, using 100% renewables and open-source technology to measure and report how much green a particular mining pool or activity is.
One should remember that it is the ‘kind’ of energy consumption that’s more an area of concern for Bitcoin rather than the energy-intensive computational practices. Bitcoin mining firms scout for excess energy sources such as the ‘flared up’ natural gas in North Dakota and Siberia that had to be burned earlier.
Many mining facilities such as the Moonlit Project have found a stronghold in countries rich in geothermal and hydroelectric energy such as Iceland and Switzerland. Mining equipment produces a lot of heat. The cold temperatures in these regions act natural coolants, and the abundance of renewable sources implies minimal environmental impact.
At times, the heat from mining facilities is used to warm houses or run fisheries and nurseries that require heat to sustain in freezing temperatures. This shift from non-renewables to renewables is quite visible. The 3rd Crypto Benchmarking Study claims 39% of the energy resources used in PoW mining are renewables.
Many crypto communities have successfully deployed the much more efficient Proof-of-Stake mechanism that consumes a lot less energy than the Proof-of-Work mechanism. Even Bitcoin communities are looking at probable solutions such as the Lightning Network and Argo Blockchain’s plan for green Bitcoin. Bloomberg Columnist Noah Smith argues the same, i.e., the switch to a less energy-intensive security mechanism could be a probable push towards a greener bitcoin.
Bitcoin, with its open network of hash power lending trustworthiness to digital transactions, holds the potential to subvert the existing financial systems. Jack Dorsey recently corroborated the claim in his recent media engagement where he stated BTC’s significance for Twitter’s future while serving as a native internet currency. The consequent carbon footprint is more an unintentional offense than an intentional fallacy. Whether Bitcoin would achieve the status of ‘green crypto’ in the coming years or not, one thing is certain, it surely is venturing on a greener path towards sustainability.