For as long as Bitcoin has been mainstream, one of the primary criticisms of the asset has been its energy consumption. Many who have criticized Bitcoin have always pointed out the fact that it doesn’t seem to be so green - and the impacts of this nature could end up affecting the world as we know it.
In truth, there is some merit to the argument. Bitcoin mining is a notoriously energy-intensive project, and anyone willing to engage in the activity will need to be ready for what it could bring. However, lately, there has been an argument about how Bitcoin could benefit from renewable energy and become much greener.
Bitcoin Just “Isn’t Sustainable”
Earlier this year, Tesla made a splash in the news when it announced that it had purchased $1.5 billion worth of Bitcoin. The company also simultaneously announced that it would immediately start taking payments for its vehicles in Bitcoin. The announcement marked a significant investment for Tesla, which claimed that it was looking to maximize its returns and diversify its portfolio.
While many were elated - and Bitcoin’s value surged past the $50,000 mark for the first time - the move did seem odd. Tesla has always championed itself as a pioneer of the green revolution, providing vehicles with low carbon footprints that don’t rely on fuel for operation. So, why accept Bitcoin knowing its energy implications?
Research has shown that Bitcoin alone emits about the same amount of carbon dioxide every year as New Zealand. So, many ask why companies that have committed themselves to environmental conservation will associate themselves with the asset.
For what it’s worth, the current discussion about Bitcoin's energy implications became even more critical when Tesla announced that it would stop accepting Bitcoin payments for a while. In a statement shared by CEO Elon Musk, Tesla said:
Tesla added that its Bitcoin investment would stand. However, transactions and payments using the asset would have to stop for now.
Interestingly, Musk isn’t the only billionaire to show concerns about Bitcoin’s energy use. Recently, Bill Gates told The New York Times that Bitcoin uses more electricity per transaction than any other payment method available. Gates added that he was a “Bitcoin skeptic,” adding that the asset isn’t a great “climate thing.”
How Bitcoin Mining Works and Why it is So Energy-Intensive?
Bitcoin miners use specialized computers that are connected to the Bitcoin blockchain. They solve complex puzzles and equations to mine, and their work leads to the verification of transactions and prevention of fraudulent activity on the Bitcoin blockchain. As a reward, miners get some Bitcoin units.
Mining has become more lucrative since Bitcoin became mainstream. However, the process works in a finicky manner, and you will need to have a lot of computing power to maximize your chances of earning. In some parts of the world, massive warehouses are filled with specialized machines that run around the clock. As expected, these computers consume tons of energy.
In the past few years, Bitcoin mining has grown to consume more energy than countries like Switzerland, Argentina, and the Netherlands.
One of the best data sources in the Bitcoin mining space is the Cambridge Bitcoin Electricity Consumption Index. It tracks mining operations’ energy usage based on their efficiency levels and the demand on the Bitcoin network at every given point. The team behind the index has said that Bitcoin needs more energy to ensure security. If mining were efficient, one entity would be able to simply control the network.
So, therein lies the problem. More energy is required to improve Bitcoin’s decentralization - thus, preserve its privacy.
How Can Renewables Help?
While it is evident that Bitcoin needs a lot of energy, the asset’s dependence doesn’t have to be on cheap, low-quality power. In fact, a lot of miners have been able to enjoy the benefits of renewable energy. Last October, the Cambridge Centre for Alternative Finance said in a report that about 40 percent of the energy consumed by Bitcoin’s complex calculations was from renewable sources. Also, 76 percent of miners were found to be using some form of renewable energy as part of their operations.
Travis Nichols, the Media Director for Greenpeace USA, has explained that the ever-increasing amount of energy needed by Bitcoin is down to the technology used to maintain it. But, at the same time, there is also a broader challenge for renewables to be incorporated into the process.
Right now, the most significant challenge appears to be the fact that renewable energy isn’t as developed and mainstream enough to support the demand for Bitcoin mining. Renewable energy sources are also more expensive, making them much less accessible to everyday miners who are already scraping just to get by.
There is no doubt that renewable energy can help miners. However, its production needs to be ramped up, and it needs to be more accessible across the board.