by Suraj Gangaram
Due to the market meltdown in early March, the price of a cryptocurrency referred to as Bitcoin dropped by $1000 within less than a day. As a result of Bitcoin’s extensive power consumption and carbon footprint, people adhering to the ESG (environmental, social, and governance) criteria have sparked debate over the practicality of it in today’s day and age. The presence of the coronavirus situation especially begs the question:
How are cryptocurrencies in general going to move forward?
Believe it or not, Bitcoin, a type of cryptocurrency which operates independently of a central bank, has a giant carbon footprint associated with producing it. The digital currency offers relative anonymity, does not charge sales tax and is free from bank and government interferences. Transactions are digitally stored as “blocks” in a chain as opposed to a traditional centralized location as in banks; the “winner” is given the right to add another block of data to the chain, and is rewarded with a new Bitcoin. Bitcoin, currently sitting at a value of around $7000, is infamous for its energy consumption, demanding a plethora of tailor-made computers to carry out its arduous mining process which requires complex mathematical computing. As part of an attempt to save on their expenditures, mining companies have relocated their computers, known as ASICs (Application Specific Integrated Circuits), to warehouses with access to cheap electricity. Currently, over 50% of all mining occurs in China’s Sichuan province, which has a superabundant capacity for hydropower. Seemingly just another financial trading tool, it consumes as much electricity as the country Chile, with nearly 19 million inhabitants. Researchers calculated that the Bitcoin network consumed 31.3 Terawatt-hours (1 TWh = 3.6*10^15 J) of electricity and 17.3 megatons (17.3 million tons of TNT) of CO2 in 2018 alone.
Companies are cognizant of the impact of crypto-currency production on climate change as it works its way into becoming the currency of the future. A Canadian company, Upstream Data, has invented a method of diminishing the amount of methane vented into the atmosphere from oil wells through utilizing the fuels as a generator for mining computers. Steve Barbour, the company’s founder, has described the venture as one of “a low capital…for an oil company.” Looking to set the path forward for ESG-minded individuals, mining companies are looking to reconfigure the processes of producing crypto-currency, before climate change demands them to do so.