How to make bitcoin greener?

How to make bitcoin greener?
How to make bitcoin greener?


Bitcoin has had an Achilles heel since its inception in 2009: its high energy consumption and CO2 emissions. Scientists in Frankfurt am Main have calculated bitcoin's CO2 footprint. 


The world of cryptocurrencies works by its own laws. And a basic law is: the higher the price, the higher the energy consumption. And, therefore, also higher CO2 emissions, especially from the "mines", which are huge computer farms where bitcoins are mined. The emissions are already so high that they are comparable to the annual emissions of entire countries: the transactions of Bitcoin currently require 140 terawatt-hours of electricity per year, according to the Cambridge Center for Alternative Finance, which is much more than the electricity consumption of the Netherlands.


Researchers at the Frankfurt School Blockchain Center, led by Philipp Sandner, come up with somewhat different results. Bitcoin currently consumes 91 terawatt-hours of electricity per year, which corresponds to a CO2 equivalent of 38 million tons. "In my opinion, electricity consumption should be evaluated neutrally first," says Philipp Sandner. The deciding factor is whether the electricity used to create new bitcoins comes from fossil fuels or renewable energy. According to Sandner's team's calculations, about 50% of the energy used in Bitcoin transactions is "brown" and the other 50% is "green."


No global regulation

Using his model calculations, Sandner and his team want to bring some transparency to the opaque network to help investors make a decision. Philipp Sandner's team has calculated that 370 kg of CO2 equivalents is produced for every bitcoin transaction. Based on it, investors could now compensate for this when investing in bitcoin or transacting in cryptocurrency. "Currently, there is no global regulation on this. And we do not want to wait," says Dominik Poiger of the fund company Iconic Funds, which specializes in cryptocurrencies. "We want to deal transparently with this carbon footprint and offset our long-term carbon footprint."

   

By this calculation, an exchange-traded bitcoin fund launched by Iconic has a carbon footprint of about 37 tons of carbon dioxide. This will be offset by purchasing certificates for a project in the Amazon basin, where tropical forests will be saved from deforestation, biodiversity will be promoted, and social projects will be launched for the local population.

   

China has transferred high energy consumption to other countries

These offsets will be necessary for the view of the climate crisis and the presumable increase in energy consumption of bitcoin in the future. For one thing, the countless computers on the bitcoin network consume electricity. In addition, participants can also "mine" bitcoins. To do this, they have to solve a puzzle that becomes more complicated as more computers participate. Several users and companies of bitcoin have specialized in this mining. They have entire farms of servers waiting to be the first to solve puzzles and collect bitcoins, sometimes traveling around the world looking for the most favorable conditions and the cheapest electricity.

  

Beijing, for example, cracked down on miners and eventually banned mining in China. "The mining facilities were closed, packed and shipped to other countries," says Sandner, who shows in a graph how Chinese mines "are rebuilt in other countries with the same computing capacity they had in China."

  

The curve has far exceeded the low of the summer and the transactions have returned almost to the levels before the Chinese intervention. Therefore, the question is likely to arise in the future as to whether investor compensation can be sufficient to match bitcoin's energy consumption.

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