David Olive: Bitcoin is inhibiting the fight against climate change

The most tangible thing about bitcoin and the more than 4,000 other cryptocurrencies is their horribly large and growing carbon footprint.

Bitcoin is inhibiting the fight against climate crisis.

The problem is getting worse. Every increase in the bitcoin price means additional power consumption by crypto producers and exchanges as the crypto computer network ramps up to meet increased demand for trades and transactions.

And that, in turn, means even more emissions of greenhouse gases (GHG) from the largely coal-fired electricity plants that power the computer-server farms that conduct crypto activity. (Crypto takes its name from cryptology, the math behind secure computer communications.)

The crypto world is largely invisible. Crypto digital tokens (there are no “coins,” only artists’ conceptions of them in news-media reports) consist of lines of computer code. These are created and processed by computers, often in remote locations. And the traders in tokens are anonymous.

But cryptocurrencies are tangible in this sense: They now consume more electric power than Norway or the entire U.S. government.

And as most of the world’s power is still generated from coal, emissions of which are the biggest single cause of climate crisis, cryptocurrencies are diminishing the winnability of our fight against climate crisis.

The electric power required to create crypto tokens loads the atmosphere with about as much greenhouse gases as Argentina.

That estimate is based on today’s total crypto value of about $1.7 trillion (U.S.), an amount roughly equal to the Canadian economy, the world’s 10th-largest.

Even if bitcoin falls short of the $100 trillion (U.S.) total value its most ardent promoters forecast, cryptos are on track to becoming the biggest energy glutton in history.

There are more than 1,000 crypto exchanges, at least 600 of which make their services available to Canadian crypto traders.

The exchanges consume still more power. They too consist of computer servers, working at a furious pace to solve a multitude of complex math problems to “unlock” the true identity of bitcoin holders.

The enormous problem of the cryptos’ carbon footprint has been overshadowed by the spectacular rise in the price of cryptocurrencies, notably bitcoin, which accounts for about 62 per cent of all cryptos by value.

Bitcoin quadrupled in price last year. So far this year, its price has jumped another 72 per cent.

Crypto has grown to a size that it threatens central banks’ monopoly on monetary policy, as a parallel currency system whose participants care nothing for global financial stability.

But officialdom has so far kept its crypto concerns in check.

After all, the bitcoin bubble is a subset of our mania-driven pandemic investment era.

But cryptocurrency is different. When investment bubbles burst, they stay burst. Not bitcoin, which has staged at least four bubbles, losing 83 per cent of its value when it last collapsed just three years ago.

Bitcoin is also described as the most retrograde form of money yet devised.

Designed to be untraceable, crypto is tailor-made for terrorists, human traffickers and drug cartels. Crypto is useless as a store of value — the first requirement of a currency — due to its notorious price volatility.

The crypto world is completely unregulated, bypassing central and commercial banks, securities regulators and consumer-protection agencies. In its 38-year existence, cryptocurrency has never been recognized as an official means of exchange, though a handful of large businesses have begun to experiment with it.

There is no recourse for the bitcoin user whose holdings at a crypto exchange — the only place to store it — have been wiped out in a hacking or malware attack on an exchange.

And it has recently become evident that crypto, with its huge appetite for computer chips, is also culpable in the current global shortage of semiconductors that threatens Ontario’s auto sector, among other industries.

All that being the case, bitcoin and other cryptos are either an exercise in magical thinking among crypto devotees, or a gateway to a 21st-century hyperefficient cashless society, once the technology has been perfected.

That’s a debate for another time. What’s beyond debate is crypto’s menacing carbon footprint.

The world is on a mission to reduce its use of coal.

Crypto miners seek out coal.

Coal is the cheapest form of power in large quantity. And for the energy-pig crypto miners and exchanges, electric power is among their biggest costs.

Crypto apologists gamely assert that cryptocurrencies provide fossil-fuel producers extra revenue to make their production more environmentally benign, and to finance alternative energy sources.

But the bulk of greenhouse gas emissions result from the consumption of fossil fuels, not their production. Any additional renewable power should be used to replace fossil fuels, not to sustain them, as the bitcoin advocates would prefer.

Crypto promoters also try to turn the tables on the handful of crypto critics who’ve clued into crypto’s outsized power consumption. They label the critics as hypocrites for failing to call out other big power consumers.

So, let’s look at the record on that.

Big users of power include electric vehicles, which collectively consume 70.9 terawatt hours (TWhr) of electricity per year.

Then there’s Google (10 TWhr), Microsoft (9.2), Facebook (3.2), Apple (1.3) and Netflix (0.45).

But bitcoin alone, leaving aside the thousands of other cryptos, consumes an estimated 439 TWhr of electric power per year.

And the other big power users provide useful services. Crypto produces no social good. Its users are an elite club with the means to make high-risk bets in hopes of scoring a quick megabuck. They provide nothing to society except a big obstacle to solving climate crisis.

There are signs that the crypto world is about to be reined in.

Citing a shortage of power for homes and industry, restrictions or bans have been placed on crypto miners in Washington State, upstate New York, Iran, and Inner Mongolia, which alone accounts for about eight per cent of the crypto world’s power consumption because of its abundance of cheap, coal-fired power.

Beijing has recently told the region’s crypto miners to pack up and leave. Hydro-Québec, its production capacity of cheap hydropower strained by crypto miners, is contemplating similar action.

Meanwhile, central bankers, unwilling to surrender their monopoly on monetary policy, are planning cybercurrencies of their own.

The People’s Bank of China has already rolled out a digital currency. And Janet Yellen, the U.S. treasury secretary and former chair of the U.S. Federal Reserve Board, is musing about a state-issued “digital dollar,” which, she says, could result in “faster, safer and cheaper payments.”

Where that leaves bitcoin is nowhere, save among those who continue to use it to avoid detection of their activities.

But state-sponsored cybercurrencies wouldn’t reduce the carbon footprint. Indeed, they would make it much larger as digital currency replaced traditional ones.

We can only hope that further technological breakthroughs reduce the cryptocurrencies’ voracious appetite for power.

Original Source