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Totting up bitcoin’s environmental costs

ASCOIN BASE IPO Shows, cryptocurrencies have a lot of fans. However, they also have slanderers. Environmentalists in particular are worried about how much energy Bitcoin uses.In the treatise Nature Communications, A group of scholars led by Dabo Guan of Tsinghua University and Shouyang Wang of the Chinese Academy of Sciences are investigating the energy use of Bitcoin in China. They conclude that without legal regulation, Bitcoin could be a “non-negligible” barrier to efforts to decarbonize China’s economy by 2024.

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Bitcoin’s thirst for energy comes from its design. Prioritize “blockchain”, which is a transaction database distributed among users, and abolish centralized records management. The blockchain is maintained by “minors”. Miners validate transactions by competing to solve math puzzles with hard-to-find but easy-to-check solutions. Each block of successfully mined transactions currently generates a reward of 6.25 Bitcoin ($ 357,000).

The system changes the difficulty of the puzzle so that on average one new block is created every 10 minutes. Due to the high price of Bitcoin, it is worth spending more computing power, or power, to chase mining rewards. However, Bitcoin’s automatic stabilizers add to the mathematical difficulty of responding. Like the Red Queen in “Through the Looking-Glass,” competing miners are simply running fast to stand still.

Despite the democratic ambitions of the currency, the mining industry is concentrated in a handful of professionals. About 70% is done in China. Researchers use economic modeling to try to calculate the amount of carbon produced in all this work. They conclude that without regulation, China’s Bitcoin mining could consume as much energy as Italy and Saudi Arabia by 2024. Annual carbon emissions are 130 million tonnes, close to Nigeria’s emissions.

Such numbers should be taken with considerable salt. Bitcoin’s energy use depends heavily on its price. Prices fluctuate significantly. The author expects a long-term trend to increase, as new Bitcoins are designed to be created in half every four years. The reality will definitely be more complicated. But the big picture that Bitcoin is a dirty business is in line with other studies. One of the commonly cited models using publicly available blockchain data states that global energy consumption is already the same as that of Kazakhstan and that carbon dioxide emissions are consistent with those of Hong Kong. thinking about.

This article was published in the print version of the Finance & Economics section under the heading “The dirty truth”.

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