It’s fair to say that Bitcoin is having a moment. In the last few months alone, investors watched as cryptocurrencies soared to dazzling new heights, and story after story emerged about Bitcoin millionaires reveling in their new wealth.
Undoubtedly, cryptocurrencies captivate us because of their potential and their promise for a financial future that operates better than markets do today. Time will tell whether or not digital coins are all they’re cracked up to be. But in the meantime, there is one problem that many investors haven’t spotted yet: Bitcoin’s carbon footprint.
Understanding Cryptocurrencies and the Blockchain that Powers Them
Bitcoin and other cryptocurrencies operate using blockchain technology. Blockchain is a ledger of transactions stored in a decentralized network that cannot be altered or changed without all users of the blockchain being aware of it. That decentralized network requires a massive amount of computer processing power to make the technology possible and viable.
Blockchain technology is one of the reasons Bitcoin looks so promising to many investors (especially as it has applications beyond currency). But it’s also part of Bitcoin’s carbon footprint, a fact that could concern environmentally conscious investors. The amount of electricity required to power the servers and devices on which blockchain depends—and from which users mine coins—is massive.
Bitcoin May Be Digital, but the Electricity Required to Mine It Is Anything But
Nature magazine helps put Bitcoin’s energy use into perspective. According to the publication, the mining of two of the most popular cryptocurrencies—Bitcoin and Ethereum—consume 47 terawatt-hours per year. By comparison, Greece’s population of 11 million uses roughly 57 terawatt-hours per year.
The Companies Taking Steps to Curb Bitcoin’s Carbon Footprint
However, many are already working on solutions to cryptocurrencies’ carbon quandary, meaning that investors can take advantage of promising opportunities without creating additional stress on the environment.
Organizations like Clean Coin are also advocating for strategies that would streamline cryptocurrency mining, for example switching from “proof of work” methods to “proof of stake” that automatically validates transactions. Teams within computing giant Intel are also working to make specialized chips and central processing units that can better handle Bitcoin transactions while using less power.
And miners themselves are looking to make changes that will reduce Bitcoin’s carbon footprint. Some of the leading mining companies like Bitmain Technologies, HIVE Blockchain Technologies, and Bitfury now seek out renewable sources of energy to power the servers they need to mine and create new coins.
Bitcoin and other cryptocurrencies contain a lot of potential for financial markets, and investors who are eager to leverage these alternatives to traditional currency are smart to explore their options. We can’t ignore the environmental toll along the way—but we may be able to support the innovators who are looking for ways to bring the powers of Bitcoin and clean energy together.