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Environmental aspect of Bitcoin
The Bitcoin blockchain uses the Proof of Work (PoW) consensus mechanism to avoid double spending and manipulation.
The process of creating a valid block is largely based on trial and error, where miners make numerous attempts to find the correct value for a block component called a “nonce”, and hope that the hash of the resulting block of transactions will meet the requirements given the given complexity.
In fact, this is “crunching numbers” — the computational work of finding the nonce parameter by enumerating the values (the so-called “brute force” method) and subsequent hashing. For this reason, mining is sometimes compared to a lottery in which a participant goes through numbers in the hope of finding a winning one. The number of attempts (hashes per second) is determined by the hash rate of the mining equipment.
The difficulty of these puzzles is regularly adjusted to accommodate changes in connected processing power and to maintain an interval of approximately 10 minutes between each block being added.
The miner who is the first to solve the puzzle gets the right to add the block he created to the blockchain and for this receives a reward in the form of the emission of new bitcoins and commissions from each transaction in the added block.
Since Bitcoin mining can provide a solid stream of income, people all over the world are very willing to run power-hungry computing equipment in order to receive rewards for the added blocks. In addition, the operation of this equipment is accompanied by the release of heat and additional energy costs for cooling are required.
Over the years, this has resulted in the total energy consumption of the Bitcoin network growing to colossal proportions as the price of the cryptocurrency rises.
The entire Bitcoin mining network now uses more power than a number of countries. According to the research platform Digiconomist, the average annual energy consumption of the Bitcoin network is about 79.63 terawatt-hours (TWh).
According to other studies conducted by scientists at the University of Cambridge, the Bitcoin network consumes about 127.7 terawatt-hours (TWh) of electricity annually. This is more than the energy consumption of all Argentina.
It should be noted that if the total hashrate of the Bitcoin network can be easily calculated, then it is impossible to make the same calculation for its power consumption, since there is no exact data on the power consumption of all mining equipment, both computing and auxiliary, including cooling.
But Bitcoin’s biggest problem is perhaps not even its huge energy consumption, but the fact that a significant proportion of mining enterprises are located in regions (mainly in China) that rely heavily on coal energy (either directly or from the purpose of load balancing).
Simply put, according to energy researcher at the Technical University of Munich Christian Stoll, coal powers Bitcoin.
This leads to a large carbon footprint — the release of carbon dioxide (carbon dioxide) into the Earth’s atmosphere.
Scope and impact
In 2019, Christian Stoll and his team conducted a study and calculated the annual range of carbon emissions from Bitcoin’s mining capacity. They got values from 22.0 to 22.9 million tons of CO2 — this is the equivalent of carbon dioxide emitted by a US city like Kansas City.
In the November 2018 carbon emissions ranking, Bitcoin ranked between Jordan and Sri Lanka (82nd and 83rd in terms of emissions). Since then, Bitcoin’s carbon footprint has only increased.
Currently, the carbon footprint of the Bitcoin network is already estimated at 37.82 million tons of CO2. Which is comparable to the carbon dioxide emissions of a country like Slovakia.
Another study, the results of which were released in October 2018, said that the energy costs of mining Bitcoin alone could generate as much CO2 emissions as possible to raise the temperature of our planet by more than 2 ° C in less than three decades.
But not everyone agrees with this conclusion and believes that such estimates are overestimated, as miners increasingly turn to sources of cheap renewable energy, such as hydropower.
In a special report published in late 2019, Christopher Bendixen of the CoinShares research group argues that most estimates of Bitcoin’s carbon footprint underestimate the role of renewables in mining. Just like data centers run by big tech companies, big mining companies can place their farms where the cheapest energy is, which is often renewable, he said.
It is important to understand that energy consumption is not necessarily equivalent to carbon dioxide emissions and environmental pollution. For example, one kilowatt-hour (kWh) of electricity from a coal-fired power plant has a significantly different environmental impact than 1 kWh of electricity from a solar park.
To determine the carbon footprint of the Bitcoin network and therefore its real impact on the environment, it is necessary to take a closer look at the actual balance (i.e. all sources of energy used to generate electricity).
More recently, studies have shown that renewable energy sources such as hydropower, solar and wind power account for a growing share of total electricity consumption. However, estimates vary greatly, ranging from about 20% of the total energy balance to over 70%.
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