The unhackable Bitcoin’s energy consumption is equivalent to 1.5 per cent of the electricity consumed in the United States! According to Digiconomist, a cryptocurrency analytical website, each Bitcoin transaction consumes 250kWh; this is enough power to light up our homes for nine days! Arvind Narayanan, a computer science professor at Princeton said about one per cent, that is about five gigabytes a day, of the global energy consumption is utilized to mine a Bitcoin per day.
So why does it consume so much energy? Its entirely dependent on computers. Bitcoin’s success lies centrally on computers. According to a recent study by CATO, “Bitcoin uses a proof-of-work (POW) consensus algorithm to reach agreement among users about which transactions should go on the ledger.” It basically involves computers solving computionally-intensive cryptographic puzzles that prove blocks of transactions, which are recorded in a public asset ledger, known as a blockchain. The ledger is accessible by computers. And this process and more consume huge amounts of energy. The study said Bitcoin requires hardware and electricity to build its network and reach out to the investors,
Cryto-Related Environmental Catastrophe
Steven Huckle, a blockchain technology researcher, says the concern is that the digital currency’s annual energy consumption is rising exponentially. Moreover, cryptocurrencies mining emits more carbon dioxide into the atmosphere. And this could push global warming above 2°C. Switzerland-based Bank of International Settlement (BIS) in a 24-page report warned of a cryto-related environmental catastrophe. “To process the number of digital retail transactions currently handled by selected national retail payment systems, even under optimistic assumptions, the size of the ledger would swell well beyond the storage capacity of a typical smartphone in a matter of days, beyond that of a typical personal computer in a matter of weeks and beyond that of servers in a matter of months.” Cosmos, a science magazine, explained “its true that the computers required to ‘mine’ digital coins actually use more energy.” This for sure creates more carbon emissions. Cryptocurrency enthusiasts argue about there being no central authority. But they fail to counter the environmental implications. BIS report states that the internet would come to a halt by Bitcoin’s communication volumes and multiple ledger operations.
However, more research and studies are needed to see the kind of implications cryptocurrency has on the environment. And solutions must be derived. With technological innovations, cryptocurrency can eventually be environmental-friendly.