The famous cryptocurrency is making the news these days. Its value boomed to the point where it reached 20 000 US dollars when it was only worth 108 $ in January 2015, thus defying the traditional financial systems since Bitcoin does not depend on any central bank or regulation authority. This fascinating monetary revolution has major environmental consequences, as explained in an article on the World Economic Forum.
What is Bitcoin?
Bitcoin is a virtual currency that is created by computer coding, and was invented in 2008. A bitcoin is in fact an encrypted code line, which is why it is called a cryptocurrency. Only 21 million units can be « mined », computer-generated, and it’s possible to buy up to 8 decimals of a bitcoin. They are held by users in digital wallets, which they use as identifiers for all their transactions. Just like any currency, bitcoins can be used to purchase goods or services, and their value can be speculated.
To make sure bitcoin units remain unique and to make fraud impossible, the transactions are verified several times. Blocks of 1 000 of them are recorded in public digital registers, that are accessible to all the actors of the chain. This process lays on a software technology called blockchain, and it is the object of the study conducted by Alex de Vries, as it consumes quite a lot of energy.
The energy consumption of 159 countries
It is the amount of energy necessary for the bitcoin to work! Computers run full speed to verify the transactions and mine (create) new bitcoins. The carbon footprint of the bitcoin is tens of times more significant than the other financial technologies’, while it only represents a very small share of all the financial transactions worldwide. Its development, on the base of the existing technologies, would represent a new threat for the environment.
The power consumption necessary to the making and exchanging of cryptocurrencies is so big that “computer miners” need to react quickly and think about more sustainable solutions to continue their activities. As mining requires more and more performant equipment, its energetic cost is also very high, which contributes to global warming and the fragilization of the ecosystems.
How can cryptocurrencies be more sustainable?
In order to validate the aforementioned blocks, the most common system, proof of work, requires each actor to verify the transactions by solving with their computers a mathematical puzzle. This very complex verification system thus demands important computer and energetic performances! Alex de Vries suggests that proof of stake be used instead as it is a less energy-consuming system that picks out verifiers depending on how much bitcoin they own. It is in the verifier’s interest to keep their bitcoins instead of selling them off; this system tends to reduce the number of transactions, and therefore their energetic cost.
The bitcoin has its place in the redefinition of the exchanges and human interactions set by the 4th industrial revolution, bringing new decentralized values and offering a vision that is free from state structures that lead the way to new social perspectives. As they are gaining in popularity, it is essential that cryptocurrencies become more sustainable, so that their development be no longer a threat to the environment.