The effect of Bitcoin mining has been a matter of debate and controversy over the last months as publications as The New York Times warned against the environmental costs of Bitcoin and NFTs, while companies like Square believe the environmental impact could be positive.
Soon after the recent direct listing of Coinbase in the NASDAQ exchange, a major milestone for the cryptocurrency industry, the New York Times published an article titled “In Coinbase’s Rise, a Reminder: Cryptocurrencies Use Lots of Energy”, in which the author shared the concerns that have been traveling around the world in regards to Bitcoin Mining’s energy requirements.
The article cited concerns such as the energy requirement of Bitcoin mining operations being higher than the electricity use in countries like Argentina, the potential Bitcoin Emission have to push global warming over the Paris Agreement limit, effect on national laws, over pollution regulation, causality in blackouts in countries like Iran, and many more.
The article proved to be highly controversial among the cryptocurrency community, resulting in detailed rebuttals from Crypto supporters like Nic Carter, who methodically addressed the issues with each of Time’s statements and concerns.
Carter and other experts have been quick to point out that studies and articles criticizing Bitcoin’s energy usage do no discriminate between renewable and non-renewable energy sources.
This is relevant as countries like China and Iceland, which are some of the most active when it comes to crypto mining, source most of their energy from renewable sources like geothermal and hydroelectric generation.
Other rebuttals include wrong assumptions in the articles regarding per-transaction energy costs, incorrect predictions regarding escalation of the network, citation of false reports by the Iranian government that were rebutted by the associated press, and many other inconsistencies.
Square Jumps Into the Debate
Square, one of the biggest Fintech companies in the United States and active Bitcoin investors, celebrated Earth day by publishing a memo on the positive impact that Bitcoin could have on the future of the earth’s environment.
Titled “Bitcoin is Key to an Abundant, Clean Energy Future”, the memo shares the company’s belief that the Bitcoin network could enable society to adopt cleaner sources of energy like solar and wind energy
Some of the reasons why the company believes Bitcoin Mining could be a catalyst for a transition to cleaner energy is that Bitcoin miners are “unique energy buyers in that they offer highly flexible and easily interruptible load, provide a payout in a globally liquid cryptocurrency, and are completely location-agnostic”, which make them the perfect candidate to use renewable energy sources, as their history has shown so far.
While some of Square’s assumptions have also been deemed overly optimistic and idealistic due to Bitcoin mining being a business and as such, driven by the interest of those running it, there are already examples proving that renewable energy sources make sense from an economic standpoint for such companies.
CITI Disagrees With Square
Citigroup has been showing increasing interest and support for cryptocurrencies over the past few months, referring to Bitcoin as a potential winner against CBDCs at a time when the cryptocurrency is at “a tipping point”.
Now, in the latest “The Future Of Money” report, the company referred to the increasing awareness over the impact that environmental concerns have over investment decisions, stating that “at the very least it may deter some investors from holding Bitcoin and it could spur government intervention to ban mining, as seen in parts of China”.
However, the report also quotes a study completed by the Cambridge Center for Alternative Finance which shows that 76% of miners use some degree of renewable energy, with 40% running almost entirely on renewable energy.
Despite citing these numbers, Citi believes that the trend is going in the opposite direction as focusing on decreasing energy per transaction will not necessarily result in reducing the environmental impact as it would also result in increased transactions.
In the case of Ethereum, which is swapping to Proof of Stake, a more valuable network should lead to more valuable Ethereum, but the risks could be high.
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Author: Nicholas Say