The environmental impact of Bitcoin
One of these downsides is the environmental impact. I’ve always thought that the concept of using electricity to power computers to ‘mine’ for digital currency is frankly ridiculous, but now we can actually quantify it. A recent study has calculated the global energy consumption of Bitcoin, and it totals a staggering 70TWh of electricity or 0.5% of all global electricity consumption, equivalent to the total energy consumption of Chile. Even when compared to mining for physical gold, mining for Bitcoin is significantly more energy intensive.
Considering that the entire internet globally uses just over 400TWh of electricity per year, and has emissions equivalent to the global aviation industry, it i clear that Bitcoin has become something of an energy hungry beast. To make matters worse, a large proportion of Bitcoin energy is consumed in China, which has a high dependency on coal power, pushing Bitcoin’s carbon footprint even higher. It isn’t just Bitcoin either. Another popular cryptocurrency, Etherium, has huge energy consumption at around 20TWh per year.
The concept of digital mining might be somewhat crazy from an environmental perspective, but Bitcoin is also inherently inefficient at processing transactions, making it both energy intensive and slow, in a world where we expect things to happen at ever increasing speed.
As noted in Digiconomist, “Bitcoin can only handle three or four transactions per second at best. By comparison, VISA has a peak capacity of 56,000 transactions per second, but requires nowhere near the same computational power“.
Yes, there are benefits for some of the extra complexity of a Bitcoin transaction compared to a standard electronic payment, but the benefit is hugely disproportionate to the cost.
It’s clear that Bitcoin is simply not scalable environmentally, but the huge energy consumption also comes at a financial cost that can only be sustained as long as the price of Bitcoin is highly inflated as a speculative investment and adds to its price volatility. This does not bode well for its future as a viable currency.
Bitcoin has some accessibility issues
Aside from the environmental issues, there are also some real accessibility issues with Bitcoin, as well as many other cryptocurrencies. This begins with the way in which they are created only by those who have the technical know-how and resources available to create them, making a few people rich, while being largely unintelligible to much of the population. Not to mention the issue of owners losing their unique keys, which is a significant security risk and accessibility issue in itself that has resulted in huge amounts of waste. It is estimated that 28.5% of all Bitcoin are permanently lost, effectively wasting the energy that was used to create them and being potentially disastrous for their owners.
Can I see a sustainable future for Bitcoin?
I think that Bitcoin is a fantastic prototype cryptocurrency that has brought us the innovation of blockchain technology. However, I think that Bitcoin itself, together with many other cryptocurrencies, should be looked at as prototypes and not as long term currencies because they contain some features that are fundamentally incompatible with the creation of a sustainable and more equitable society.
That said, I think that the door is wide open for the creation of new cryptocurrencies that are designed from the outset to be efficient, low energy, fast, accessible to all, distributed in a manner that does not concentrate wealth in the hands of a few, and are resistant to the volatility caused by financial speculators.
I don’t think that a cryptocurrency that meets these criteria currently exists, but some interesting projects are emerging such as Eco Coin and the forthcoming Chia Coin from BitTorrent founder Bram Cohen. I will watch with excitement to see what the future brings.
