Bitcoin has shed about a quarter of its value within one month. Falling from its April 16th high of $63,500 to currently trading at $48,000. Couple of factors have been responsible for its recent slump, an Inquiry by the U.S. Justice Department into the crypto currency exchange, Binance on the accusations of money laundering are just a part of the reason.
The major blow was in form a tweet from Tesla CEO, Elon Musk, who indefinitely suspended the purchase of its electric automotive vehicles from Bitcoin . Singling out the crypto currency because the mining process of Bitcoin was very power intensive, it leaves behind a large carbon footprint and the environment suffers the consequence of the said activity. Something that he set out to change when he pioneered electric automobiles to reduce the carbon footprint left behind by vehicles operating on an Internal combustion engine.
Why does bitcoin consume extra-ordinary amounts of energy?
Cambridge Bitcoin Electricity Consumption Index (CBECI), which tracks the power usage by the crypto currency shows that energy usage was rising constantly since 2016 and accelerated sharply in 2020 to reach an all time high of 149 terawatt-hours (TWh). To put this into perspective, Alphabet uses around 12.2 TWh, about the same amount of energy as the entire nation of Switzerland, and the entire nation of Netherlands. If Analysts at International Energy Agency (IEA) were to be believed, the situation could worsen, and the energy consumption could rise to 500TWh if miners were to use the most power intensive equipment’s for mining.
Bitcoin is earned by people who are called miners. They need to solve complex equations, which requires brute-force processing powers from the computers. The more powerful the processor is, the better it is placed to crack the equation and thereby consumes lots more energy. The reward for all of this are Bitcoins.
China powers around 80% of the global cryptocurrency trade, and it relies on lignite, a polluting coal to fulfil its power needs. The relationship is direct, the more bitcoins are mined, the more power will be consumed and as a result the environment will be polluted more to meet those power demands. This race to mine the cryptocurrency can compromise China’s climate change goals and it will take until 2060 before China would be able to meet the cryptocurrency industry’s needs through renewable energy as per Bloomberg. Now the question begs that, though Bitcoin can set an individual free, but at what cost?
