Energy Crisis Threatens To Derail Ukraine’s Bitcoin Ambitions

   2021-03-14 07:03

Bitcoin is booming. Thanks to increasing acceptance, sky-high prices, and high-profile adoptees like Tesla, the sector is red-hot. Even traditional banking institutions are getting in the game. According to a statement by the president and chief operating officer of Goldman Sachs this week, more of their clients than ever are demanding the buzzworthy cryptocurrency. In fact, the prominent investment bank and financial services company is relaunching its cryptocurrency trading desk after shelving the venture three years ago. Goldman’s John Waldron went on to say that Goldman is betting big on Bitcoin in the post-pandemic era as the sharp rise in online commerce over the last year will continue to grow and cause an “explosion” in the adoption of digital currency use.

As Bitcoin usage and prices increase, more mining operations are popping up around the globe to mint more of the cryptocurrency. China has been mining so much bitcoin (about two thirds of the entire world’s mining operations, in fact) that entire regions are threatening to ban the practice outright in an attempt to cut down on energy usage. Russian energy giant Gazprom recently opened up a Bitcoin mining operation based in one of its Siberian oil drilling sites, “unlocking the power of Russia’s oil and gas resources for the needs of bitcoin mining” and allowing the country to mine Bitcoin virtually for free. 



Now Ukraine is aiming to enter the fray and become one of the major global Bitcoin powers as well. Ukrainian energy company Energoatom, one of the world’s largest nuclear power producers, is in the first steps of building up its very own major cryptocurrency mining operation with the ultimate goal of channeling up to 2,000 megawatts of power capacity toward Ukraine’s cryptocurrency and data center facilities. But Bitcoin’s biggest liability–its massive energy consumption–could derail Ukraine’s entry into the global mining market.

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Bitcoin is notoriously energy-hungry. As cryptocurrency miners plug entire warehouses of computers into the grid, Bitcoin’s energy footprint has ballooned to that of an entire nation, edging out Argentina. Just one bitcoin transaction is equal “equivalent to the carbon footprint of 735,121 Visa transactions or 55,280 hours of watching YouTube,” according to Digiconomist, creator of the Bitcoin Energy Consumption Index. While these comparisons have their limitations–”the average Bitcoin transaction is worth about $16,000, while the average Visa transaction is worth $46.37”–it’s still clear that Bitcoin is not an energy-efficient model, to say the least.

In fact, it’s recently gained the ire of prominent critics including one Mr. Bill Gates, who has called out the cryptocurrency as directly emperilling the world’s ability to combat climate change. “Bitcoin uses more electricity per transaction than any other method known to mankind, and so it’s not a great climate thing,” Gates told the New York Times before calling himself a “bitcoin skeptic.”

In addition to being less than ideal for the climate, Bitcoin’s energy consumption is also proving to be a problem for would-be mining hubs like Ukraine. Even though Ukraine’s planned Bitcoin operations are intended to become some of the largest in all of Europe, “the country’s energy crisis in February has exposed the sector’s weaknesses, dashing hopes that mining projects will come online anytime soon,” Seeking Alpha reported this week. “Overall, the power sector experienced 92 emergencies resulting in power unit shutdowns between January 1 and February 9, mostly caused by maintenance failures and personnel errors,” the report details. “The number of power sector emergencies is unprecedented in the modern history of Ukraine.” This energy crisis, coupled with erratic policy response, has had the effect of scaring away prospective cryptocurrency mining investors in Ukraine. 

But for every country that can’t spare the massive surplus energy capacity that it takes to become a bitcoin mining hub, another is certain to step up. It’s a lucrative business that’s only growing. We can only hope that those new adoptees will be powering their mining operations with carbon-neutral energy sources, or Bitcoin’s negative externalities will quickly prove to outweigh its financial gains. 

By Haley Zaremba for Oilprice.com

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CryptoCurrencyUSDChange 1hChange 24hChange 7d
Bitcoin63,405 0.87 % 0.44 % 9.20 %
Ethereum2,382.5 1.56 % 4.56 % 12.64 %
Binance Coin560.61 2.46 % 0.70 % 38.61 %
XRP1.760 3.45 % 2.35 % 60.27 %
Cardano1.460 2.87 % 5.16 % 16.66 %
Tether1.000 0.11 % 0.17 % 0.09 %
Polkadot42.23 1.83 % 1.97 % 2.76 %
Litecoin270.15 1.99 % 0.78 % 13.72 %
Uniswap34.85 1.97 % 0.24 % 11.14 %
Dogecoin0.1304 1.96 % 44.07 % 101.73 %
Chainlink38.51 6.18 % 10.94 % 10.74 %
Bitcoin Cash832.20 5.64 % 13.70 % 25.40 %
Stellar0.6290 2.25 % 4.63 % 17.06 %
Theta Network11.84 1.38 % 2.44 % 1.05 %
Filecoin171.24 3.36 % 4.89 % 3.26 %
USD Coin1.000 0.18 % 0.36 % 0.26 %
VeChain0.1702 0.41 % 19.79 % 47.87 %
TRON0.1416 3.00 % 3.18 % 13.38 %
Wrapped Bitcoin63,476 0.86 % 0.39 % 9.23 %
EOS7.590 3.08 % 2.97 % 14.07 %