The price of cryptocurrencies is soaring after El Salvador’s President Nayib Bukele announced on Friday that the country is using volcanic energy to mine Bitcoin.
The news came via Bukele’s twitter account, where the president posted a video of a geothermal mining facility embedded at the base of one of El Salvador’s mountains.
Shortly after the video was posted, Bukele announced on his account that El Salvador had minted its first volcano-powered Bitcoin. The president dubbed the project the “volcanode.”
— Nayib Bukele 🇸🇻 (@nayibbukele) September 28, 2021
Bukele then tweeted an image showing an account balance that proved El Salvador had officially mined 0.00599179 Bitcoin, or $280 USD. Bukele said that the country is “still testing and installing” its volcanic mining operation but affirmed that his government was serious about the project.
The price of Bitcoin, Ethereum, Ripple, Cardano and all of the 30 biggest cryptocurrencies rose in value following Bukele’s posts. Bitcoin went up roughly 10% to reach $47,000.
El Salvador turning to geothermal energy could have a dramatic effect on Bitcoin
Bitcoin mining involves high-powered computer rigs that verify transactions on the blockchain. These set-ups are notorious for consuming gigantic amounts of energy, stoking concerns over their emissions and environmental impact.
These anxieties led to a drop in Bitcoin’s value at the beginning of this year when Tesla CEO Elon Musk said that he would stop accepting Bitcoin as a form of payment for his electronic vehicles until the cryptocurrency could find a solution to its rampant energy consumption.
Musk said that while he felt cryptocurrency to be innovative, it was not worth the cost of further harming the environment:
“We are concerned about rapidly increasing use of fossil fuels for Bitcoin mining and transactions, especially coal, which has the worst emissions of any fuel,” Musk said. “Tesla will not be selling any Bitcoin and we intend to use it for transactions as soon as mining transitions to more sustainable energy. We are also looking at other cryptocurrencies that use <1% of Bitcoin’s energy/transaction.”
The geothermal energy El Salvador is sourcing from its volcanoes is a creative answer to the baggage of energy consumption that the production of Bitcoin and other proof-of-work cryptocurrencies carry with them.
Bukele has drawn international attention (and criticism) for his interest in utilizing Bitcoin to attempt to lift El Salvador out of poverty.
El Salvador became the first country in the world to accept bitcoin as legal tender earlier this month, despite international concerns of risks to consumers.
Twenty years after it adopted the US dollar as its national currency, El Salvador has become a crypto laboratory. Citizens will be able to shop, pay taxes and buy land using the volatile cryptocurrency.
Bukele’s government claims the move will give many Salvadorans access to bank services for the first time and save some $400 million in fees on remittances sent home from abroad every year.
Remittances account for more than a fifth of GDP in the dollar-ized economy, mainly sent in dollars via agencies such as Western Union by an estimated 1.5 million expats.
According to World Bank data, El Salvador received more than $5.9 billion in 2020 from nationals living abroad, mainly in the United States.
And the country is relying on this money to boost a struggling economy that contracted 7.9 percent in 2020 due in large part to the coronavirus pandemic.