Recently, tycoon Elon Musk surprised locals and strangers with the decision to stop accepting payments in Bitcoin and other digital currencies for his Tesla products.
Intuition and common sense could tell us that, by not having a material support (such as, say, banknotes, coins, jewelry or gold bars), cryptocurrencies do not have an impact on the environment. However, that is far from the truth for these reasons:
Cryptocurrencies need potent servers that consume a lot of energy… seriously tons.
Bitcoin and other cryptocurrencies need servers to host them. The value of cryptocurrencies is determined by the number of people and resources invested in their circulation. These resources are not ethereal or simply a sequence of codes. To host cryptocurrencies and maintain their value, there is a need for powerful servers that are often found in massive, power-hungry server farms, not only to run computers but also to maintain the air conditioners that prevent them from heating up.
Obviously, all of this takes electricity that is generally produced through non-renewable methods. It seems that Musk’s decision is starting to have real repercussions, as reported by DiarioBitcoin: “Most recently, the multimillionaire convinced Bitcoin miners to create a Council that promotes the use of renewable energy within the industry.”
Cryptocurrencies consume so much energy that countries such as Iran have suspended digital mining due to severe blackouts.
To realize the scale of energy consumption involved in mining Bitcoin and other cryptocurrencies, you have to think about what happened recently in Iran. There are so many digital miners, registered and apocryphal, that entire cities have suffered blackouts due to the amount of resources consumed by the servers.
As told by Social Geek, “Iran’s decision is forced due to the recent blackouts in several cities in the country, which could put basic services at risk. Cryptocurrencies represent a high consumption of electrical energy, so it is a sensible decision.” The ban will continue until at least September 22 of this year.
New cryptocurrencies will be ecological and the Bank of Canada will set the tone.
The environmental cost and amount of fossil fuels needed to maintain cryptocurrencies like Bitcoin have prompted new actors in the market to start operating with ecological goals.
The Bank of Canada recently announced it will launch digital money but their option will be much more environmentally-friendly than the ones that are currently available. As reported by Penticton Western News, the Bank of Canada is researching the viability of launching its own digital currency. The advantage, according to reports, is that people already trust the Bank of Canada and would not need to consume much energy, which is what makes cryptocurrency buyers feel confident (think of it this way, Bitcoins must be worth something if thousands of servers are required to maintain them, if a global infrastructure supports the currency’s value).