Environment: Bitcoin’s power problem
As digital currencies grow, so do worries about their real-world footprint, said Ryan Browne in CNBC.com. Last week, one of Bitcoin’s biggest cheerleaders, Elon Musk, announced that Tesla would no longer accept the digital coin as payment for vehicles, because of concerns about “rapidly increasing use of fossil fuels for Bitcoin mining.” Tesla purchased $1.5 billion worth of Bitcoin in February, and Musk indicated no plans to sell. But he alluded to data from researchers at Cambridge University showing what he considered an “insane” spike in Bitcoin’s electricity usage this year. Musk is hardly the first to express “wariness about its impact on the environment.” New Bitcoins can only be created, or “mined,” via an intensive computational effort that requires an “unfathomable amount of energy.” By Cambridge’s estimate, this mining consumes as much energy annually as all of Argentina. And roughly 70 percent of the mining is done in China, “whose economy is still heavily reliant on coal.”
Miners are rewarded handsomely (6.25 Bitcoins, currently worth about $350,000) for cracking the mathematical problems that unlock new coins, said The Economist. But the automatic stabilizers in the system “vary the difficulty of the puzzles” to ensure that no matter how many miners are working on the problem, a new block of coins is generated, on average, only once every 10 minutes. So competing miners must run ever faster “simply to stand still”— the epitome of wastefulness. In the Finger Lakes region of upstate New York, an idled power plant is up and running again just to “power Bitcoin mining,” said Elizabeth Kolbert in The New Yorker.
The influx of miners in Plattsburgh, N.Y., “drove up the cost of electricity so dramatically” that the city needed to enact a moratorium on new operations. When “the world desperately needs to cut carbon emissions,” does it makes sense to devote a country’s worth of electricity to a virtual currency?
“If you believe Bitcoin offers no utility beyond serving as a Ponzi scheme,” then any consumption of energy would be considered wasteful, said Nic Carter in the Harvard Business Review. Leaving that aside, though, some of the conventional energy and emissions assumptions that are used to estimate carbon footprints don’t apply to Bitcoin. For instance, many of China’s Bitcoin miners have set up shop in places with abundant and cheap hydropower, much of it under-utilized. As for Elon Musk, said Megan McArdle in The Washington Post, I’m skeptical he just realized “it takes boatloads of power to ‘mine’ digital gold.” I suspect what he’s really noticed is Bitcoin’s weakness as a currency: “If you think your Bitcoin is going to quadruple in value again, why would you trade it for a car today?”