The future, the digital, the global – these are supposed to be our great emancipators, freeing us from the rusted clutches of human-caused climate change.
Want to reduce your carbon footprint? Digitize and electrify your car. Want to make your nation less reliant on pollutants? Invest in the future of green energy. Want to make your economy less wasteful? Embrace the efficiencies of a globalized market.
Yet, we appear to have made a misstep in recent years: we’ve embraced Bitcoin as the face of the future. And it certainly has the face for it. It is inherently decentralized and globalized, and can exist only digitally. It offers the possibility of instantaneous and secure transactions, without any third-party oversight. It promises to revolutionize the way we think about money, the way we spend, and all the institutions we’ve constructed over the past four centuries to regulate our markets.
But perhaps we’re not yet ready for cryptocurrency. The cost – both human and environmental – that we are paying for this particular avatar of the future might be too high.
Bitcoin’s annual carbon footprint is equivalent to that of Argentina
Bitcoin mining, which is the computerized process in which a bitcoin is awarded to a computer that solves a complex series of algorithms, is a deeply energy intensive process. (FYI, this has nothing to do with actual mining such as for gemstones and the like, just as bitcoin is not a real coin. Bitcoin mining simply involves a computer solving a very difficult algorithm).
The amount of electricity used to mine bitcoin “has historically been more than (electricity used by) entire countries, like Ireland,” said Benjamin Jones, an expert on bitcoin’s environmental impact from the University of New Mexico. “We’re talking about multiple terawatts, dozens of terawatts a year of electricity being used just for bitcoin … That’s a lot of electricity.”
Cambridge’s Centre for Alternative Finances estimates that bitcoin’s annualized electricity consumption hovers just above 115 terawatt-hours (TWh) while Digiconomist’s closely tracked index puts it closer to 80 TWh. In fact, a single transaction of bitcoin has the same carbon footprint as 680,000 Visa transactions or 51,210 hours of watching YouTube, according to the site.
Bitcoin mining is so energy intensive, it has actually had an influence in prices in some power and utility markets, according to a UK study. This surely does not bode well for any country that is trying to reduce its carbon footprint, a goal that should be at the forefront of every government’s agenda.
Even if some argue that bitcoin mining is becoming increasingly sustainable in countries that adopt green energy, it must be said that we are nowhere close to where we need to be on that front. According to Cambridge, China has the most bitcoin mining of any country by far. While the country has been slowly moving toward renewable energy, about two-thirds of its electricity still comes from coal.
The maker and breaker of fortunes
The stories of overnight millionaires is pretty common in the world of bitcoin investment. Anyone who invested in bitcoin in, say, March 2020, would have seen their investment increase to 1,000% of the original by March 2021.
This, of course, is matched by the flip side of this story: Anyone who invested in March 2021 would have lost half of their investment by May 2021 – that’s three months. People have lost all their savings on bitcoin, and they’ve lost it for completely mundane reasons, like Elon Musk suggesting via meme that Tesla might no longer accept bitcoin. Keep in mind that the 1,000% increase in bitcoin’s value was also prompted, at least in part, by Musk’s tweets promoting cryptocurrency.
But this extreme volatility is normal, because bitcoin is a relatively young currency that has not been widely adopted by the marketplace. What this means in the short term, though, is that bitcoin functions simply to move money from one stock market investor to another in a pretty random way. And those who benefited from investing in bitcoin did not make their profits from some actual bitcoin good or service. Instead, their profit was simply extracted from some other unlucky investor, in what has become an extremely unforgiving zero-sum game. Bitcoins encompass all the worst aspects of the stock market while retaining none of its productive potential.
Cryptocurrency feels like the future. Your author would really want it to be a feasible reality. It has the potential to transform the global economy, and at its best, it can help lift millions from poverty.
But we’re not there yet. Mining cryptocurrency comes at a heavy cost to the environment that we’re not yet ready to offset. Even transacting already mined bitcoin is so much worse for the environment than regular credit card transactions. Investing in cryptocurrency feels barely any more ethical than gambling, and has zero objective output in the economy.
Cryptocurrency might have its place in the future. But, let’s be content with waiting for that future. For now.
Do you think bitcoin is sustainable? What have your experiences been with trading bitcoin? Let us know in the comments below!