How Is Bitcoin Bad For The Environment?

So, I came across this tweet from Dr. Robert Rhode the other day:

I was shook. Apparently, each transaction costs 640kWh of electricity, or the same amount needed to travel 3,500km in a Tesla. The thought that digital currency could be bad for the environment had never occurred to me, I had thought that the only money-related environmental problems would be the cotton paper, polymers, or metals used to make physical money. This prompted me to do some more digging into the environmental impact of cryptocurrency.

Bitcoin

Bitcoin was the first decentralised cryptocurrency, created in 2009. To generate or ‘mine’ bitcoin, you have to guess a random number that solves an equation generated by the system. This is very difficult and takes a lot of computing power, and thus, electricity. 

Electricity usage has fallen a bit on the back burner in terms of climate change culprits, especially as we mostly consider personal usage. But corporate usage such as this is on a much larger scale than we would expect. The Cambridge Bitcoin Energy Consumption Index showed that Bitcoin uses 0.4% of the world’s total energy consumption. This is insane to me; I had no idea one currency could be this high. If Bitcoin was a country, it would consume the 40th most electricity out of 195. 

So, what’s the problem with energy consumption? Well, electricity needs power, and today power comes from mostly non-renewable sources. In this case, the University of Cambridge found that 72% of the energy that Bitcoin mining uses is Non-renewable. That’s a lot of resources being used up. It costs a lot too: for each equation solves, you are rewarded with one block of 12.5 Bitcoin (worth about £500,000). Up to 80% of that is spent on electricity, so combined with the initial cost of computers, the profits are very slim. This means that it’s more difficult to get a worthwhile return on investment and it’s motivating to use up a lot of resources to turn a profit. 

Is It Worth It?

Bitcoin was designed to make it incredibly hard to steal. It is transferred via a blockchain, a type of database that links blocks of information together rather than storing them all in one place like banks do. This is the main attraction, but there are several others. Bitcoin isn’t the same as paper money; the price goes up and down. Since it’s invention, the price of one bitcoin has gone from 0.06p to over £41,000, that’s an almost unheard-of return on investment compared to storing your money in a bank and losing money to inflation each year.

But let’s compare the environmental cost. The Bank of England printed almost 4 million banknotes in 2020. These are made of polymer, which is bad for the environment. It doesn’t degrade and fills up landfills, birds tend to mistake it for food which causes millions of deaths each year, and it contaminates water. The durability is on purpose, to make the notes last longer. This is obviously not great for the environment. However, it has a 16% smaller carbon footprint than the other option, cotton paper and it more sanitary. 

Is online banking better? Its widespread use makes cash almost obsolete (especially in a pandemic where contact is limited – I haven’t had any cash in months and I always run into trouble at the supermarket when I don’t have a pound coin for the trolleys). If we take into account no banknotes, no travelling to banks and reduced impact of banks, and computing costs, it’s a massive improvement according to a recent report from Javelin Strategy & Research. It takes about 26 TWh per year to run the servers, which is much less than the Bitcoin cost of 78TWh. However, in reality we have to factor in the cost of ATMs and branches, which brings the banking total to about 100TWh. 

What’s the best option?

So, looking at the various costs, it’s not clear cut which is best. In theory purely online banking would be best for the environment, but we have to remember that it makes us more susceptible to financial and identify theft. But we have only looked at Bitcoin. Are there alternatives that are financially safe and good for the environment? According to Blue and Green Tomorrow, there are actually a bunch of cryptocurrencies that benefit the environment:

• Nagricoin works on solving soil pollution. It being developed by National Agricultural Technologies to produce an organic fertiliser that doesn’t contaminate the air or ground. 

• Solarcoin incentives investors by rewarding them with Solarcoin tokens for every megawatt of electricity generated using solar solutions.

• Cryptoleaf is a platform for businesses that are working on environmental problems to reduce cost of operations. It also runs several eco-friendly projects. 

• Ecocoin gives you cryptocurrency by carrying out sustainable work, mainly by donating trees. This is meant to make you think about your contribution to the planet rather than only thinking about money. 

Final Thoughts

Finance is a complicated issue. The environmental impact is also complicated: how do you compare harmful materials to excessive electricity use when it comes to what’s best for the planet? Bitcoin is definitely not the solution, especially since it’s growing in popularity. One day maybe we could get to using 100% renewable power sources but until then it’s a huge waste of resources. I love the idea of using cryptocurrency to incentivise businesses to create sustainable solutions, I think large-scale impact is a lot more effective than considering whether an individual person should be buying a fraction of a bitcoin. The lesson is definitely to look into where and how you spend and invest because there are so many opportunities to do right by the planet. 


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