Bitcoin Mining Done Using Cleaner Energy Will Make Elon Musk Love the Asset Class Again
A lot of focus has been placed on Bitcoin’s massive carbon footprint. While efforts are being made to improve the energy profile of the cryptocurrency, some investors who care about sustainability have jumped ship in favor of more environmental-friendly cryptocurrency options.
In May, Tesla Musk made a tweet that surprised many people when he announced that Tesla would no longer accept vehicle purchases made using bitcoin, citing environmental impact concerns about cryptocurrency mining heavy energy use. It is not news that Tesla CEO Elon Musk is an advocate for sustainable use in mining bitcoin.
Musk’s criticism for bitcoin triggered a massive selloff in the asset class as investors holding the bullish sentiment for the bitcoin saw it as an opportunity to make profit.
The calling out of the most popular and most valuable virtual currencies caused the digital coins to suffer a sharp crash. On Tuesday, the price of Bitcoin fell below the long long-held support at $30,000, driving the year-to-date gain to a low of just 3%, according to CoinDesk 20 data.
The drop also comes in the wake of the People‘s Bank of China crackdown on crypto mining and bitcoin’s role and other cryptocurrencies role in extorting huge ransoms from large companies, hospitals and city governments. Some experts see the crackdown as the main driver for the red candlesticks in crypto market charts.
The greater demand and higher prices of the digital currency incentivize miners to audit it in exchange for an opportunity to occasionally receive small amounts of bitcoin that becomes a solid stream of income. The process of mining bitcoin is energy-intensive as solving complex equations needed to produce new blocks and validate transactions requires enormous computing power.
According to a BBC report on the soaring energy usage that results from the combined computing power for mining and processing bitcoins and other cryptoassets, the increasing carbon footprint of disruptors like digital currencies becomes harder to ignore.
In a 2019 study findings in the scientific journal Joule, it was estimated that at present, the bitcoin mining network generates between 22 and 22.9 metric tons of carbon dioxide per year, which is the same amount of carbon footprint comparable to Jordan and Sri Lanka.
At current rates, bitcoin mining operations consume approximately 110 terawatt-hours annually, which is about 0.55% of global electricity production.
In another study conducted by the University of Cambridge Index, it was estimated that each hour Bitcoin consumes approximately 97 terawatts, which is more than what is used by Kazakhstan. The increased complexity in solving math problems required to run crypotmining facilities suggests that more and more computing power is needed.
Some other credible estimates suggest mining of the cryptoasset requires as much energy as other countries put together.
For example, an article by Deutsche Welle shows that mining bitcoin uses more electricity per transaction than the annual consumption of countries such as New Zealand and Belgium, countries with populations of approximately 4.91 and 11.46 million people, respectively. This certainly sounds alarming, but that kind of energy consumption has become the latest flashpoint for disruptors like digital currencies, including bitcoin.
At this point in time, we see opportunities for stakeholders in the cryptocurrency sector to look for ways to improve the energy profile of bitcoin and clean the digital currency market up. Taking such tangible action will play an instrumental role in accelerating the shift to a sustainable cryptocurrency sector where bitcoin mining will be more environmentally friendly by ending the overreliance on fossil fuels.
Considering that the cryptocurrency sector has become a topic of concern at a time when we need to be reducing carbon footprint, tackling the issue of relying on non-renewable energy sources is one of the main hurdles that need to be overcome.
Now let’s take a look at how bitcoin can have a shot at being more environmental-friendly than other cryptocurrencies.
Numerous viable alternatives can play a critical role in ensuring the industry becomes more sustainable in the long term. The one with the most potential to decarbonize bitcoin is called proof-of-stake (PoS). PoS is a type of consensus model used by blockchain networks to achieve distributed consensus across the network.
According to Investopedia, proof-of-stake allows network participants to be main validators of block transactions based on how many coins they hold. This helps cut the staggering amount of energy. Some cryptocurrencies already use PoS or plan to use the system in the future.
For example, Ethereum, the second-largest cryptocurrency after bitcoin, has reported its intention to adopt PoS. According to the Ethereum Foundation, PoS will be 99.95 less energy-intensive. Ethereum will be transitioning off to PoS in the upcoming months.
There are other resources for those players in the industry who want to offset bitcoin’s carbon footprint to ensure that the energy consumed in the industry is entirely carbon-free. Other options include using XRP Ledger, which is a low-carbon technology. The XRP Ledger is based on the Federated Byzantine Consensus model. Tech Crunch estimates that validation and security XRP Ledger is 61,000 less energy-intensive than proof-of-work.
Ripple is the blockchain company behind EXPR plans and uses the Ripple Protocol Algorithm (RPCA). Ripple protocol requires that at least 80% of participants in the Unique Node List (UNL) must come to the same conclusion before a transaction gets applied to the EXRP ledger. The result is secure, energy-efficient and reliable transactions in a matter of seconds, meaning participants in a network can move money around currencies with relative ease.
Another way the mining for bitcoin can become green is to use geothermal and hydroelectric energy sources to mine the cryptocurrency. The mining of bitcoin that is powered by such renewable energy will have a significantly minute environmental impact.
An article in Business Insider shows that El Salvador has confirmed that it would mine the digital currency using geothermal energy from its volcanoes. This points to the possibility of Al Salvador becoming a global hub for mining. This way, cryptomining operations would also provide the country with the much-needed economic boost in the process.
Well. Mining bitcoins using cheap and particularly sustainable sources of electricity is not something new. This is because a country like Iceland has been operating cryptomining facilities running entirely clean, cheap geothermal and hydroelectric energy sources.
These are just three examples of how bitcoin mining can be done in a more environmental-friendly way. I’m sure I’ve missed a few outstanding options for sustainable mining of cryptocurrency.
More internal dialogues involving climate advocates, cleantech industry leaders, scientists, and global finance experts can truly position bitcoin as the most sustainable cryptocurrency towards creating a green, digital financial future.
Such a collective action and shared accountability will be also a way to impact the climate crisis positively. It will be also the step in the right direction of making bitcoin legitimate in the eyes of institutional investors like Elon Musk.
