While the benefits and disadvantages of bitcoin and other cryptocurrencies have long been debated, their impact on the environment has only just begun to be discussed.
Some argue that they are shady and untraceable, and others dismiss them as a bubble ready to burst, but despite criticisms, cryptocurrencies make up a significant portion of economic life today.
The widespread use of these digital currencies has urged researchers to look into the potential environmental impact of cryptocurrency.
Although it may seem that a digital coin, stored in a virtual wallet, could not cause significant damage to the environment, the act of “mining” bitcoin and other cryptocurrencies can use more electricity each year than some countries.
What is “mining?”
“Mining” refers to the act of creating new bitcoins, and the process involves extremely high-tech computers that solve complex mathematical problems.
When bitcoin started, in 2009, it was essentially worthless. Miners could create new coins using any household computer, without expending much energy.
Now, when one bitcoin is worth about $50,000, mining requires special computer systems, and uses up tons of energy, nearly as much as is expended by the average household in 10 years.
While mining bitcoin is an expensive, energy and time consuming process, those who can create new coins can make a fortune. This has led some people and companies to purchase entire warehouses filled with computers with the only purpose of mining bitcoin all day, everyday.
Environmental impact of bitcoin and other cryptocurrencies will only grow
This same process of mining is used in many cryptocurrencies, but is most damaging when used for bitcoin and ethereum.
Bitcoin’s carbon footprint has become massive in the wake of this cryptocurrency mining boom.
Each year, mining bitcoin uses up 91 terra-watt hours of electricity, which is more than the nations of Argentina, with a population of 45 million, and Finland, home to 5.5 million, use in a year.
In fact, Elon Musk, one of the biggest proponents of bitcoin, has decried its environmental damage. Musk once accepted bitcoin as currency for Tesla, his forward-thinking clean energy and electric vehicle company, but reversed the decision when he learned of the massive amount of energy that is required for bitcoin.
As bitcoin and cryptocurrencies as a whole become more popular, the damage to the environment will only grow.
In an attempt to reduce its carbon footprint, China has banned bitcoin and cryptocurrency mining, but experts warn that the ban will not stop the activity, and that miners will just move to another country to continue their work.
Many environmentally conscious proponents of cryptocurrencies have argued that mining could be powered by renewable energy, like solar or wind power.
Some argue that many miners are already using renewable energy. A study by Cambridge University shows that about 39% of bitcoin mining is conducted using alternative energy sources.
Yet the anonymous nature of cryptocurrencies, which are unregulated and exist outside of the realms of banks and nations, means that anonymous users can mine using any power they want.
Activists also claim that the renewable energy used to mine bitcoin could be used for more pressing matters, like in homes or vehicles.
This disastrous environmental impact of cryptocurrencies, along with their criminal potential and volatile value, has caused many to wonder if they are worth the potential benefits.
Billionaire criticizes cryptocurrencies
John Paulson, a billionaire who made his money investing in hedge funds and who predicted the huge housing crash in 2008, says all cryptocurrency, like bitcoin, is inherently “worthless” and “will go to zero.”
The investor, who was one of the few who foresaw the mortgage collapse in what has been referred to as “the greatest trade ever,” stated in a recent interview with Bloomberg Wealth that all cryptocurrency will “eventually prove to be useless.”
Bloomberg Wealth asked in their Sunday interview with Paulson if he was a believer in cryptocurrencies.
“No, I’m not,” Paulson relied, adding “And I would say that cryptocurrencies are a bubble. I would describe them as a limited supply of nothing.
“So to the extent there’s more demand than the limited supply, the price would go up. But to the extent the demand falls, then the price would go down. There’s no intrinsic value to any of the cryptocurrencies except that there’s a limited amount.”