Carbon footprint of Bitcoins

Q. What is the news?

Various experts have recently flagged the carbon footprint issue of bitcoins that leave behind a carbon footprint of 38.10 Mt a year. 

Q. What is carbon footprint of Bitcoins?

• A recent study by Alex de Vries, a Dutch economist, has shown that Bitcoins leave behind a carbon footprint of 38.10 Mt a year.
• The annual carbon footprint of Bitcoins is almost equivalent to that of Mumbai, or to put it to a global perspective, as high as the carbon footprint of Slovakia.
• A recent study has shown that Bitcoins leave behind a carbon footprint of 38.10 Mt a year.
• According to a study titled ‘CO2 Emissions from Fuel Combustion (Highlights) 2017’, Mumbai’s yearly carbon footprint stands at 32 Mt, while Bangalore’s is at 21.60 Mt.
• Vries has been able to create a Bitcoin Energy Consumption Index, one of the first systematic attempts to estimate the energy use of the bitcoin network.

Q. What is the Relation between creating bitcoins and electricity required? 

• Bitcoins are created by “mining” coins, for which high-tech computers are used for long hours to do complex calculations.
• The more coins there are in the market, the longer it takes to “mine” a new one and in the process, more electricity is consumed.
• As mining provides a solid source of revenue, people are willing to run power-hungry machines for hours to get a piece.
• In 2017, the Bitcoin network consumed 30 terawatt-hours (TWh) of electricity a year.
• As such, each bitcoin transaction roughly requires an average of 300kg of carbon dioxide – which is equivalent to the carbon footprint produced by 750,000 credit cards swiped.

Q. How is carbon footprint calculated? 

• The major problem with mining Bitcoin is not its massive energy-consumption nature; it is the fact that most of the mining facilities are located in regions that rely heavily on coal-based power.
• Earlier, determining the carbon impact of the Bitcoin network was difficult as tracking down miners was never easy.
• As per the estimates of De Vries, roughly 60% of the costs of bitcoin mining is the price of the electricity used.
• The price of a Bitcoin stood at $42,000 and at this rate; miners would be earning around $15 billion annually.

Q. What are the other impacts of Bitcoin mining? 

• The effects of cryptocurrency mining often spill over to other parts of the economy.
• With miners using high-tech computers for hours to formulate new blockchains, these machines do not last long.
• Manufacturers of Bitcoin mining devices need a substantial number of chips to produce these machines and recently, during the Covid-19 crisis, the world had witnessed a shortage of these chips.
• This shortage, now, in turn, started affecting the production of electric vehicles around the world.

Q. What can be done to control the carbon footprint?

• The Dutch economist asks policymakers to follow the path shown by Québec in Canada, where a moratorium on new mining operations has been imposed.
• Although Bitcoin might be a decentralized currency, many aspects of the ecosystem surrounding it are not.
• Large-scale miners can easily be targeted with higher electricity rates, moratoria, or, in the most extreme case, confiscation of the equipment used.
• Governments can also ban cryptocurrencies from digital asset marketplaces as it will affect the prices of a digital currency.