Since the inception of Bitcoin in 2009, cryptocurrency has been a source of fierce debate throughout the world. Whether it’s concerns regarding their legitimacy as actual currencies, the security of investments or the best exchange service it seems there is always something to argue about when it comes to cryptocurrency. The latest in the long list of arguable topics is the effect cryptocurrency, and particularly mining, is having on the environment. As with any debate, there are of course two sides. While critics say cryptocurrency and the processes and technology needed to run it are using an unsustainable amount of energy, advocates argue that it uses less energy than traditional banking.
So why does cryptocurrency use so much energy? Simply put, in order for Bitcoins and other cryptocurrencies to be created, people must use powerful computers to perform complicated calculations in order to “mine” coins. As the popularity of cryptocurrency grows, mining is becoming more and more lucrative, so more people have decided to take up mining as a cash earning hobby and, in some cases, a full time career. In addition, As the number of coins available increases, so too does the time it takes to mine new ones, which then means the same happens to the energy consumption. This domino effect is now provoking fears that if the popularity of cryptocurrency continues to rise, it will be to the detriment of our planet. As with any contentious topic, a great number of experts and public figures are offering polarizing opinions. Alex de Vries, founder of DigiEconomist has stated “I’ve never seen anything that is as inefficient as bitcoin”. Conversely, research conducted by ARK Investment Management discovered that Bitcoin uses less than 10% of the energy traditional banking does.
So, what are the facts? According to a 2017 study, Bitcoin used around 30 terawatt hours (TWh) of electricity that year. These days, it is estimated that it now uses between 78 TWh and 101 TWh. For context, even if we generously use the lower end of this scale, that is more than or equal to the consumption totals of Chile, Austria and Bangladesh. While this may initially seem alarming, this is still considerably less than the consumption of traditional banks. While studies on the environmental impact of banks are much less publicized than those about cryptocurrency, statistics show that even when only considering bank branches, ATMs and servers, consumption can be estimated at over 140 TWh. This is without considering the energy consumed by printing physical (paper!) cash and transporting it around the world, which would surely produce some astonishing numbers. What these facts show is that running the cryptocurrency ecosystem is much more energy efficient than centralized banking.
Despite statistics showing that cryptocurrency production and circulation is indeed more energy efficient than the established currency system, the intense scrutiny persists. However, both producers and miners of cryptocurrency have risen to the challenge, a 2019 study by CoinShares showed that over 70% of bitcoin miners use renewable energy as part of their power sources. Research conducted by Cambridge University also found that 40% of miners total energy use was made up of renewable energy, it’s difficult to imagine the same can be said for traditional banking.
Although the cryptocurrency using a lot of energy myths have been busted, it won’t be the last factually incorrect criticism aimed at this phenomenon. However, bitcoin and other cryptocurrencies pride themselves on transparency so new investors can be sure to find as much information as they need before taking the plunge.
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