The future of the world is Bitcoin. It is one of the most revolutionizing technologies of this century; however, it has come under criticism due to energy consumption and CO2 emission. The rate of Bitcoin energy consumption, according to experts, is more than that of Switzerland and Ireland. The focus on the negative side is currently making people focus on Bitcoin as an environmental hazard rather than a technology that can be modified to meet sustainability needs. Not all the available technology was sustainable at first. Still, a rapid modification and re-engineering led them to where they are currently, a case in hand are the airplane and locomotives.
Why does Bitcoin consume energy?
Every innovation and technology consumes energy; however, the rate of energy consumption varies according to the functionality, performance, and the nature of the components making up the entire technology. Bitcoin due to functionality and the complexity of its processes is likely to consume more energy than other innovations.
The source of high energy consumption by Bitcoin is attributed to the algorithm used in Bitcoin mining. This algorithm also referred to as Proof of Work, is a giant thirsty for computer power. Those engaged in full time or large scale Bitcoin mining, therefore, require many machines to meet their needs. The proof of work ensures trusted authority and consensus in the Bitcoin network. The increased number of machines poses a new challenge: the cost and energy required for cooling and lighting the Bitcoin mining houses/warehouses.
The fact that Bitcoin requires energy to operate cannot be ignored. Energy is the driver of successful Bitcoin transactions and security. Instead of criticism, a lot of emphasis should be on the development of new energy sources and cost-efficient methods. The complex nature of Bitcoin operations makes energy expenses the leading expenditure in the financial statements of Bitcoin mining companies and individuals. Credit Suisse estimates that the energy costs are likely to rise as Bitcoin becomes a global currency.
Current global energy consumption by Bitcoin
Many studies focus on current energy consumption by Bitcoin. These studies have focused on major energy-consuming operations and components such as lighting, cooling, proof of work, and the hardware used during mining. One of the latest online methodologies used in estimating Bitcoin energy consumption is the Cambridge Bitcoin Electricity Consumption Index (CBECI). This online methodology first estimates the total amount of energy used in the maintenance of the Bitcoin network, followed by Bitcoin’s annual energy consumption. According to CBECI, these consumption levels place global energy consumption by Bitcoin more than the annual electricity consumption in Switzerland. While yes, this may seem like a big number, it is important to note that still according to CBECI, There is currently little evidence suggesting that Bitcoin directly contributes to climate change. Even when assuming that Bitcoin mining was exclusively powered by coal – a very unrealistic scenario given that a non-trivial number of facilities run exclusively on renewables – total carbon dioxide emissions would not exceed 58 million tons of CO2, which would roughly correspond to 0.17% of the world’s total emissions. This is not to say that environmental concerns regarding Bitcoin’s electricity consumption should be disregarded. There are valid concerns that Bitcoin’s growing electricity consumption may pose a threat to achieving the United Nations Sustainable Development Goals in the future. However, current figures should be put into perspective: available data shows that even in the worst case (i.e. mining exclusively powered by coal), Bitcoin’s environmental footprint currently remains marginal at best.
Even though many studies have revealed Bitcoin as the world-leading energy guzzler, CBECI and Katrina Kelly-Pitou, a professor of the University of Pittsburgh, are challenging the world to focus on Bitcoin on other dimensions and its global impacts. The challenge is further validated by the fact that Iceland is experiencing the rise in Bitcoin miners than any other country, yet it is dominantly relying on renewable energy. Bitcoin proponents, and analysts are currently challenging Bitcoin critics to compare the energy consumption and carbon emission with some of the technologies at their beginning. The answer to this challenge puts us to the conclusion that technology and innovations are bound to evolve. As they evolve to meet demands and become user friendly, their main target is to become sustainable and focus on world safety. The world should no longer blame Bitcoin for its consumption and emissions; rather, they should focus on means to make Bitcoin energy efficient and reliant on renewable energy rather than fossil energy. Using renewable energy to power Bitcoin operations will eliminate the use of fossil fuel, reducing the already high carbon emission from these sources. Having been on criticism for energy consumption, the news on Bitcoin energy consumption is currently hyped up with many outlets spreading more exaggerated figures than the factual figures. If getting the factual figures is currently a challenge due to the limitations of the surveys and the estimating systems, why don’t the world focus on the approaches of making Bitcoin better?
Bitcoin energy cost per transaction
The popular measure of the cost of energy per transaction is regularly presented in the media despite several problems. First, transaction throughput is independent of the electricity consumption of the network. The addition of more mining equipment and therefore the increase in electricity consumption will have no impact on the number of transactions processed. Second, a single Bitcoin transaction can contain hidden semantics that may not be immediately visible or intelligible to observers. For example, a transaction can include hundreds of payments to individual addresses, settle second-layer network payments, or potentially represent billions of time-stamped data points. using open protocols such as OpenTimestamps. In addition, it should be noted that despite an increase in the overall energy consumed by the system, the energy efficiency of transactions has actually improved over time and several other protocols under development will bring their share of additional optimizations, allowing an increasing number, perhaps even an infinite number of transactions on the blocks, which makes the unit energy consumption of transactions much less impressive. Finally, another argument can be put forward concerning the transported value of the transactions. Indeed, Bitcoin already transfers more value than giants such as PayPal, with far fewer transactions. Just focusing on the amount of energy and the amount of transaction leads to terrible predictions that will never come true.
Remedy to Bitcoin energy consumption
The solution is to power Bitcoin mining operations from renewable energy fully. The cost of purchasing solar panels is currently subsidized, and one of the pioneers of renewable energy, Elon Musk, just introduced the world to the largest solar plant in Australia. Relying on solar energy and Lithium battery brings more advantages to the environment than the current energy methods. The use of solar energy could also lead to other unexploited parts of the world, like semi-deserts and deserts being put to good use through the generation of solar energy. Finally, a new challenge goes to software and hardware manufacturers. They should come up with complex systems that consume less energy. This will ensure that miners can use a reduced number of machines to meet their demands hence reducing energy consumption and carbon emission levels.
Bitcoin is part of the future, whether its detractors like it or not. No technology begins at a perfect point, but rather modifications and discoveries make a system better and efficient as time goes by. The discussion should shift from Bitcoin energy consumption levels and carbon emission levels in focusing in making fossil energy sources obsolete. Shifting the current discussions will drive optimism in the world while posing a challenge for them to make Bitcoin a sustainable avenue for future employment. The new discussion should also focus on renewable energy and Bitcoin. It should focus on how much we should generate renewable energy to cover Bitcoin operations rather than fossil fuels.