Bitcoin is the most important cryptocurrency in the world, the blueprint on which the entire market niche was created. As a pioneer in the introduction of blockchain and digital finance, it has also attracted a lot of scrutiny from its detractors, who have been trying to remove it from the marketplace. It’s not just about the recent regulatory efforts in the United States but also about earlier potential issues of the technology. One of the most amply discussed is that mining, the process used to create and validate new coins, has earned the label of environmental unsustainability.
But is the characterization correct, and can Bitcoin ever truly ditch it?
Resource consumption
As climate change issues become more pressing and akin to a crisis rather than a minor inconvenience, more members of the general public have started looking for ways to reduce their carbon footprints and help prevent the collapse of ecosystems all over the world. As a result, industries that have been deemed unsustainable have been criticized for their consumption and urged to make the necessary changes that would make them eco-friendly.
Cryptocurrency mining is one of the most notable examples, especially since it has been revealed that the complex procedure can guzzle down as much or even more power than some countries like Argentina, which has a population of nearly 46 million. According to a White House report, the cryptocurrency industry accounts for roughly 140 million metric tons of CO2 released directly into the atmosphere. That amounts to approximately 0.3% of globally produced greenhouse gas emissions.
During the 2021 Texas blackout, when power grids failed the state, causing extensive property damage, health issues and even death, many partially blamed the situation on cryptocurrencies. It was later revealed that the computers at the Bitcoin mine were using enough electricity to power 6,500 homes. Many therefore concluded that the grid simply couldn’t handle the extra demand.
However, miners were quick to defend themselves by addressing the fact that many industry sectors use even more electricity than crypto and that digital finance has been unfairly singled out.
Potential
It’s essential to know that there’s more to mining than meets the eye. Most people only have a vague idea of what the process entails, apart from the fact that it solves complex mathematical problems to create a new currency. While it can definitely be the case that, when misused, the process can cause severe problems for the community, it also has quite a lot of potential to improve existing systems.
Bitcoin mining can create an incentive for the development of renewable energy, as well as create new jobs in rural areas. Since much of the work can be performed remotely, it also eliminates any problems that might come with commuting and its associated costs. There’s also a case to be made for the ways in which the blockchain can improve the resilience of power grids.
To fully understand mining’s full potential, the conversation needs to remain open so that the effects of the process are transparent and readily available for anyone who wants to analyze them. And it’s not just for crypto users and aficionados but also for policymakers, the media and members of the general public who might still hold onto misconceptions or extreme views regarding digital money.
Bitcoin mining can function on the peaks of energy consumption and then keep production going during times when the demand is considerably diminished, such as overnight. At the 2022 Texas Blockchain Summit, participants discussed how mining keeps the grid balanced since developers keep the consumption lower when prices become steeper so that it can be returned to other consumers.
Miners need cheap energy sources because they want to remain competitive. Many rely on eco-friendly sources such as hydroelectric power plants, solar panels and wind farms. This also ensures further stabilization of the grid by absorbing all the excess electricity that would otherwise go to waste.
Since that means that inefficiencies are largely accounted for, greener energy is promoted, and there’s a better investment in renewables infrastructure. If miners can establish their bases in areas that benefit from a sizable amount of environmentally friendly power, they can directly contribute to the adoption and implementation on a larger scale of a more sustainable energy grid.
As competition becomes fiercer, miners are incentivized to find innovations that can reduce their energy consumption without delivering a significant blow to their earning capabilities. This is what has led to the development and introduction of cooling devices and more potent, energy-efficient hardware.
Leading the way
After China banned all crypto production and trading in 2021, many countries took over. The United States is the most obvious example, but there are many other nations all over the world that are paving the way for cryptocurrency innovations. It was recently revealed that Bhutan has been hosting mining operations for years. The country, located in the Himalayas, has access to a large amount of eco-friendly power through its large hydropower reserves.
The United Arab Emirates has also recently emerged as the most crypto-friendly destination in the Middle East, with an estimated capacity of roughly 400 megawatts. That accounts for no less than 4% of the global Bitcoin hash rate. In the past, the UAE established itself as a pro-Web3 destination for companies and retailers looking to focus on and develop using crypto. Abu Dhabi has naturally become the hub of operations owing to its energy efficiency, as well as the status of a trading center.
The bottom line
In June 2023, it was reported that there had been a 44% decline in Bitcoin mining profitability over the last year. Despite this, mining companies have continued to increase their production. Considering the fact that values continue recovering after the brutal crypto winter of 2022, which, according to researchers, has been the worst of its kind to ever happen in the digital finance ecosystem, it wasn’t poor planning at all.
While there are still many misconceptions surrounding mining, things can hopefully improve over time so that the process can become even better and more efficient.
