Bitcoin is the largest cryptocurrency in terms of market capitalization. As we know Bitcoin is a decentralized payment solution where the transactions are verified by the miners. These miners get the transaction fees and the block reward in return for maintaining the ledger. Before proceeding towards how bitcoin affects our environment let’s ‘s understand how miners validate the transactions.
When someone transacts with the Bitcoin network, the transactions are stored in a mempool temporarily until they are picked up by a miner. To understand this let us take an example of a suitcase that has a 3 digit password. Assume that the password is 123. But you don’t know the password so you will try different combinations until the lock opens.
You will start with 001,002,003 and so on until you reach 123 and the lock opens. Similarly, miners are continuously searching for transaction IDs( also known as hash ) by doing some complex permutations and combinations. The number of combinations a computer can run in one second is known as hash rate. As the required hash rate by Bitcoin rises, miners tend to increase their computational power in order to achieve that hash rate.
Electricity Consumption
In order to do these calculations, Bitcoin miners need high computational power. These days GPUs and ASICs are widely used for mining Bitcoin. As we all know, machines can get hot if they are in operation for a long period of time. Therefore we also need some cooling resources to cool down these units. Now these setups cost a huge amount of electricity as well. Bitcoin mining consumes around 91 terawatt-hours of electricity annually. That’s more annual electricity use than all of Finland, which is a country of 5.5 million people. That’s almost 0.5% of all electricity consumption worldwide
Effects of Bitcoin on the Environment
Electricity produced from coal plants, Hydro plants emit CO2 as a waste product which contributes to global warming. One study shows that Bitcoin has a direct effect on our environment. Researchers have observed climate change around the world, as 22 to 22.9 million metric tons of CO2 is released every year because of the electricity consumed by Bitcoin mining pools. One study warned that Bitcoin could push global warming beyond 2°C. Another estimated that bitcoin mining in China alone could generate 130 million metric tons of CO2 by 2024.
Globally, the carbon footprint of bitcoin mining is greater than that of the United Arab Emirates and falls just below the Netherlands.
Elon Musk at first supported Bitcoin because he liked the idea behind it. However he has also expressed his concern over the negative impact of Bitcoin on the environment which lead to a huge dip in the Crypto Market.
Some Power Plants use Water as their coolant which leads to an increase in the temperature of the water used. Now this water is released back to the lakes and water bodies endangering the lake’s wildlife and ecology. This imbalance can prove fatal to the fishes or other organisms in the lakes.
And it is only getting worse because miners must continually increase their computing power to compete with other miners. Moreover, because rewards are continually cut in half, to make mining financially worthwhile, miners have to process more transactions or reduce the amount of electricity they use. As a result, miners need to seek out the cheapest electricity and upgrade to faster, more energy-intensive computers.
And even if it one day becomes possible to run all bitcoin mining on renewable energy, its e-waste problem still remains. To be competitive, miners want the most efficient hardware, capable of processing the most computations per unit of energy. This specialized hardware becomes obsolete every 1.5 years and can’t be reprogrammed to do anything else. It’s estimated that the Bitcoin network generates 11.5 kilotons of e-waste each year, adding to our already huge e-waste problem.
Is there any solution to this problem?
Developers are working on some layer 2 solutions for Bitcoin such as the Lightning network. However we can use other blockchains which do not require high computational powers in order to become validators. For example, Proof of Stake enabled blockchains do not require as much computational power as Bitcoin does. ( yes there are some trade offs but still they are energy efficient.)
Until then, only renewable resources such as solar energy can be used to generate electricity needed for mining bitcoin.
Furthermore electricity can be saved from coolants if we set up bitcoin mining rigs in cold areas.
The e-waste problem can be solved by using reusable setups. For example if we use GPUs for Bitcoin mining it can still be used in computers. Another solution to this is to establish some regulating authority which can monitor how the e-waste is handled.( Note that this is only a temporary solution until we find a permanent one to stop the negative impacts of Bitcoin )
However it is impossible to stop the pollution which is being caused by Mining Bitcoin. The only permanent solutions can be implementing layer 2 solutions on Bitcoin or by shifting to other energy efficient blockchains.
If you are thinking that the government should ban Bitcoin mining, let me tell you that the Government can’t. That’s the power of decentralization of the bitcoin network. Even if the government announces a ban on Bitcoin mining people can still secretly mine Bitcoin on smaller scales. In case of large scale miners, they can shift to another country and keep on mining bitcoin.
Conclusion
Bitcoin needs to solve these problems because even if it has huge advantages over traditional payments, these environmental factors can’t be ignored. One thing should be noted that Bitcoin has paved a way for many decentralized applications and use cases. Now it’s the duty of the developers to bring improvements to this decentralized ecosystem.
Also Read: Top 10 Cryptocurrencies To Invest In 2024
