LettersHow bitcoin and other cryptocurrencies can fix their carbon emission problem
- In addition to regulation, market-based approaches are needed to transition to climate-neutral energy sources or to a system that verifies the source of electricity used to create the cryptocurrency
A study by the Cologne Institute for Economic Research states that, by 2030, if 50 per cent of the world population were using cryptocurrencies, electricity demand would exceed today’s global energy supply.
An issue that needs quick fixing is the blockchain technology that forms the basis of digital currencies, especially in terms of the mining process, computation and data storage – which uses huge amounts of electricity. Research by Bank of America says bitcoin is comparable to small developed countries, like the Czech Republic, Greece and Chile, in terms of energy consumption.
Innovative investments in energy-efficient sources are needed: the Chinese in Sichuan and Yunnan provinces take advantage of hydroelectric power, according to a 2019 article in the Joule journal. Sadly, they switch to greenhouse gas-emitting coal during dry seasons. Researchers at Aalborg University in Denmark note that China accounts for 47 per cent of bitcoin’s carbon emissions.
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Chinese police seize 4,000 bitcoin-mining computers that illegally tapped US$3 million worth of electricity
Where does that leave us in terms of the cryptocurrency reform agenda? The key lies in “proof of work”, a validation mechanism which involves computers racing to crunch puzzles, but which generates huge amounts of carbon dioxide.