Bitcoin: the situation as of July 6, 2021.
Today, as I write this, 1 euro is equivalent to $1.19.
Also today, 1 single bitcoin, is exactly equivalent to 28,291.84 euros or 33,628.50 US dollars.
Impressive, isn't it?
And while it's true that almost all of us have heard the name of this cryptocurrency before, it's equally true that far fewer of us know exactly what cryptocurrencies themselves are, where they come from, and how much they "cost" us in environmental terms.
Let's take a step back: what are Bitcoins and cryptocurrencies?
Bitcoin is a virtual currency created in 2009 by one or more hackers under the pseudonym Satoshi Nakamoto.
The Bitcoin, unlike other currencies (such as euro or dollar), does not have behind it a Central Bank that distributes new money. To give it a "structure" there are basically two cornerstones: a network of "nodes", i.e. PCs networked together to create it, and the use of a complex cryptography system to validate and secure transactions.
Therefore not being produced by any State Mint (not being tangible) it is a so-called "cryptocurrency", as defined:
"A virtual currency that constitutes a digital representation of value and is used as a medium of exchange or held for investment purposes."
Cryptocurrencies can therefore be transferred, stored or traded electronically, and among them, the most often named are: Bitcoin, LiteCoin, DashCoin, Ripple, Ethereum, Cardano, Tron.
Why then are we talking about Bitcoin at all?
If there are so many types of cryptocurrencies, why do we hear about Bitcoin more often?
The answer is easy: they are currently the most widely used and popular, even among the uninitiated.
You will certainly have heard of Bitcoin thanks to the tweets of Elon Musk, the founder of PayPal, Tesla and SpaceX, who thanks to some messages on Twitter has made the value of this virtual currency fluctuate enormously.
As in the last tweet, thanks to which Musk has generated a new positive rearrangement on the cryptocurrency market, in practice, typing only 194 characters, has allowed the value of Bitcoin to increase by 9%.
The tweet in question was this:
"When there is confirmation of reasonable (50%) use of clean forms of energy by miners with a positive future trend, Tesla will return to allowing Bitcoin transactions."
Yeah, but why did Elon mention clean energy in relation to Bitcoins?
The (not so) clean energy to generate Bitcoins
Without getting too much into computer technicalities, we can summarize as follows.
Being a virtual currency, the only way to generate it is to "extract it" from "virtual mines", an operation called "mining" (to mine), thanks to the great computing power of a large number of interconnected computers. All this, following a blockchain, that is a control system that validates transactions, a sort of register that takes into account all transactions ever made with this digital currency.
To do all this, however, it is essential to have access to large amounts of energy.
And here comes the point.
Do bitcoins and cryptocurrencies pollute?
Yes. Indirectly, of course, but yes.
As mentioned, in order to create this virtual currency, it is necessary to use computers that are quite high performance and beyond energy intensive.
In fact, according to estimates by the University of Cambridge, in 2019, electricity consumption to mine Bitcoin was slightly higher than that of the whole of Egypt and slightly lower than that of Poland.
Not only that.
Data from CCAF (Cambridge Centre for Alternative Finance) updated to April 2020, states that about 70% of Bitcoin is mined in China.
And China, at the moment, can only make use of the electricity produced by the large dams in the Sichuan and Yunnan areas (thus energy that comes from renewable sources) in the wet season, not throughout the year.
So, all the rest of the time, mainly fossil fuels are used to produce electricity, including, coal.
Now, as you can easily imagine, using coal to produce electricity, brings with it a large production of CO2 emissions.
Yes, but then how much do they pollute?
For now, it is difficult to have a certain figure.
Suffice it to say that, again thanks to the study by the Cambridge Centre for Alternative Finance, with over 151 Twh of annualized electricity consumption, Bitcoin, on May 14, 2021, would be the 25th most energy-intensive "country" in the world.
A fair question about Bitcoins, maybe two.
At this point it is natural and even genuine to ask a question: does it make sense to produce a virtual currency, without a central bank to manage it, subject to great volatility, capable of keeping transaction information secret and able to generate such a large amount of CO2 emissions?
Personally I don't have an answer, rather I have another question:
Will planting more and more trees be enough to reduce cryptocurrency emissions in the future?
In the meantime, let's hope that Elon Musk's latest tweet has (in part) already shown "a" way, the most sustainable one.
What do you think?