By Toh Ting Wei
Wild speculation over Bitcoin has seen its price surge to record highs in recent months, but critics fear the cryptocurrency could now push frontiers in an unwelcome territory — climate change.
The process of creating bitcoins uses massive amounts of electricity, leading detractors to call it a huge waste of power that could be put to better use. Scientists warn that global temperatures could be driven up too.
A limited number of bitcoins is released into circulation by a process called mining, in which powerful computers compete to solve complicated mathematical problems every 10 minutes.
As more bitcoins have been released, the codes to be cracked in this ongoing contest have become more and more difficult, requiring larger and larger energy-hungry computers to work on them.
Before the reward of 12.5 bitcoins can be claimed every 10 minutes, the fastest mining computer must show it consumed enough energy as a proof of work done. Should a computer use less energy than usually required to crack the code, it will be rejected by the network and fail to snag the prize.
This process is happening non-stop in vast warehouses called “mining farms” in countries with cheap energy. They are known to be operating everywhere from China to India, Iceland and parts of the United States.
Bitcoin mining will continue until 21 million bitcoins are released into the network. So far, about 16 million are in circulation.
Critics have blasted this system as a competition to waste the most electricity possible.
According to a Bloomberg report, about 75 per cent of the world’s Bitcoin mining capacity is in
China, because of its cheap electricity. More than half of China’s energy is generated by burning coal, which has been branded by environment group Greenpeace as the “single greatest threat facing our climate”.
Bitcoin mining businesses are now moving into energy-rich Canada as they seek more cheap energy. But the country’s largest utility company has said that it will not have the long-term capacity to meet all the anticipated demand.
The Digiconomist’s Bitcoin Energy Index estimates that the entire network now guzzles 44.54 terawatt hours annually, placing it ahead of Hong Kong and Iraq, and just behind Singapore. That also means some 20 megatonnes of carbon dioxide is emitted, or roughly the equivalent of 1 million transatlantic flights.
The enigmatic currency’s energy consumption more than doubled in the past six months, according to the index, and is expected to gobble up even more in time to come as more players join the mining business.
Some analysts say the sharply increased demand for cryptocurrency could accelerate climate change. International Monetary Fund chief executive Christine Lagarde told Bloomberg in January that the Bitcoin system will consume as much electricity as Argentina this year, which ranks 30th in energy usage globally.
She said: “The bitcoins mining, which is this accelerated and augmented use of computers to actually determine the value, and incentivise the functioning of the mechanism, is energy hungry.”