The want for cryptocurrencies has soared during the last ten years, unlike the demand for relatively few other trade items. At the same time, the bitcoin loophole is being used for a passive income for people. The market capitalization of all cryptocurrencies has already surpassed $3 trillion, and the price of Bitcoin at the beginning of 2022 was over twice what it had been the previous year. Millions of people have been enticed to try their hand at the crypto pie by the rise in price of these online currencies, while not being aware of or taking into account the negative environmental impact. Numerous social and environmental groups have criticized cryptocurrencies for having a huge carbon footprint and harming the environment.
Explaining Bitcoin Mining
The method of constructing new bitcoins, or “winning,” by resolving increasingly complex mathematical riddles is known as “bitcoin mining” (PoW). As a result, the probability of being the one to solve the riddle and reap the rewards of the newly minted bitcoin increases, but so does the amount of energy needed to operate these specialised computers, known as ASIC systems.
Even while ASIC systems are more energy-efficient than traditional computers, they nonetheless use more energy since they are frequently kept running nonstop and must cool the hardware, whether with inbuilt fans or air conditioning, in order to prevent overheating.
What Makes Crypto Environment Unfriendly?
The energy-intensive processes required for each transfer and for “mining” new coins are what have the biggest negative effects on the environment from cryptocurrencies. The amount of energy needed varies between cryptocurrencies; some, like the most widely used cryptocurrency, Bitcoin, use significantly less energy, while others demand a lot.
Each Bitcoin transaction is thought to consume roughly 2100 kilowatts per hour (kWh). Using non-renewable energy sources to power cryptocurrencies such as Bitcoin can result in astronomical greenhouse gas emissions. The annual carbon footprint of one bitcoin is equal to the emission of 97.2 megatons of carbon dioxide.
How Does Bitcoin Mining Directly Affect The Environment?
Higher processing power enhances the probability of correctly predicting the PoW solution, which has encouraged miners to form mining pools or establish mining farm facilities. In a mining pool, a group of miners, all with their own power-hungry equipment, attempt to solve the puzzle at the same time and divide the rewards according to the amount of “effort” or processing power that each miner provided.
In contrast, a mining farm is a storage facility that houses hundreds or even thousands of ASIC computers that continuously mine for bitcoins.Such mining fields still require significant quantities of electricity to run them, even if the concentration of these computers into one location supports a decrease in energy usage as well as the specialised ASIC gear was created for using energy more efficiently.
In all, Bitcoin mining requires 91 TwH of energy yearly, which is more than Finland’s annual electricity use and 7 times more than Google. This amount represents around 0.5 percent of the global electricity consumption.
Although bitcoin is helping people preserve their assets or use it as an investment, for example, in the shape of the bitcoin loophole. But it’s vital to recognise that cryptocurrencies also benefit those who have been left out of the world financial system, limit the buildup of riches by the banking system, and act as a store of value for citizens in nations with high inflation.
Cryptocurrencies are intrinsically protected against government control or appropriation by virtue of their decentralised character, and they can be effective vehicles for political opposition.