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Monday, April 19, 2021

Bitcoin versus traditional coins: what is more environmentally friendly?

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Kamal Saini
Kamal S. has been Journalist and Writer for Business, Hardware and Gadgets at Revyuh.com since 2018. He deals with B2b, Funding, Blockchain, Law, IT security, privacy, surveillance, digital self-defense and network policy. As part of his studies of political science, sociology and law, he researched the impact of technology on human coexistence. Email: kamal (at) revyuh (dot) com

Bitcoin has become a hotly debated topic in global public opinion after its skyrocketing price. People who are not convinced of the future of this asset can cite a long list of negative effects linked to its mining. High power consumption is one of its main disadvantages.

Microsoft founder Bill Gates recently broached the subject in a chat with journalist Andrew Sorkin. According to the philanthropist, mining this cryptocurrency consumes a lot of energy, so “it’s not a very good thing for the climate. This is one of the reasons why Gates does not invest in bitcoin.

To ensure network security and validate transactions, many Bitcoin miners often use the so-called Proof of Work or PoW (Proof of Work) algorithm. This system requires the expenditure of an enormous amount of energy to run the mining network. Thus, a typical miner needs a room full of computers to solve mathematical problems throughout the day.

According to the digiconomist portal, at the beginning of March, the estimated energy use by all bitcoin miners reached more than 77,780 terawatt-hours a year. For their part, researchers from the University of Cambridge pointed out that if this cryptocurrency were a country, it would be among the 30 largest energy consumers in the world.

However, a study by the British company Coinshare has revealed that the global network used to mine bitcoins obtains 74.1% of its electricity from renewable sources (wind, solar and hydroelectric), reports Ledger, one of the largest manufacturers of hardware wallets for cryptocurrencies.

As miners need more and more equipment, some of them have put sustainable energy in their sights. They use it mainly to reduce their costs and increase their profits.

Another solution that allows reducing energy consumption is to change the algorithm. Using the Proof of Stake or PoS system can be a good alternative.

Unlike PoW, this algorithm has low power consumption as it does not involve mining. All it requires is a laptop to run a node, which will be running 24 hours a day and using about 350 kilowatts of power for a whole year. This means that it uses 35% of the energy of a single Bitcoin transaction.

Today, the world is on the brink of innovation and has yet to figure out how best to ensure the security of a blockchain network. However, solutions are already emerging that allow better equipment to be produced to reduce the volume of electricity used in mining.

Meanwhile, the issuance of traditional currencies such as the dollar or the euro also requires certain costs. Although there are fewer banknotes in circulation now than in the past, only in the US its supply reached 2.05 trillion dollars in February 2021, according to the Federal Reserve.

Furthermore, printed money always has a limited life cycle: it wears out over time and needs to be reproduced. For example, a $ 10 bill has a useful life of 5.3 years and a $ 5 bill of 4.7 years. To be able to reissue them, many natural resources are needed (water, ink, paper, cotton, linen, and different types of metals).

The issue of the impact of the issuance of traditional currencies has been little studied throughout history. One of these rare investigations was conducted by Chris Ahlers in 2010. At that time, Ahlers and other researchers calculated that to print US dollars it uses 1.4 billion liters of water a year, 3,540 tons of ink, and more than 7,100 tons of cotton.

In turn, the banking system consumes more energy than the Bitcoin mining network. Its energy costs are estimated to be around 100 terawatts per year. To make matters worse, banks need to run many servers, branches, and ATMs to keep their system accessible to the public.

Bitcoin’s climate footprint of 37 megatons of CO2 remains smaller compared to other digital industries, researchers from Arcane Research point out. Today, all digital technologies emit 1,600 megatons of greenhouse gases into the atmosphere, and bitcoin mining accounts for only 2.3% of this figure.

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