BitCO2in: is there a way to make cryptocurrencies climate-neutral?

13th December 2017 by CMIA

The media is full of reports on the rocketing value of Bitcoin and other cryptocurrencies like Ethereum. More and more respected financial institutions are becoming involved in this sector, while regularly the newspapers report on the soaring value of virtual currency.

While you and I may not yet be able to pay for our weekly shopping in Bitcoin, there is an ever-growing list of companies that accept the currency for payment.

The latest prices put the value of one Bitcoin at more than $16,500, a far cry from its initial value in 2010 of around $0.06! Even since July this year, the price has increased more than 6 times.

We don’t intend to debate the pros and cons of cryptocurrencies here, but to share some alarming climate-related data that is emerging from research into the booming Bitcoin “mining” sector, and to offer some suggestions on how to make virtual currencies truly green.

According to estimates published out by Alex de Vries, a cryptocurrency analyst, Bitcoin mining around the world currently consumes more than 32 terawatt-hours (TWh) of electricity per year (enough to power more than 3 million US households) and has a carbon footprint of nearly 16 million tonnes a year.

If Bitcoin was a country, it would rank 62nd in terms of power consumption, between Denmark and Serbia, de Vries calculates.

Observers point out that with the majority of Bitcoin “mines” located in either China or the US, the large arrays of computers required to carry out the calculations that represent “mining” are most likely to be powered by the most climate-unfriendly fuel source, coal.

To date, the cryptocurrency world does not appear to have concerned itself with the climate impacts of its energy use, but as this new currency grows more ubiquitous, the entities that mine and earn Bitcoin will become better known in the public arena.

And at that point we’re certain that questions will start to be asked about whether Bitcoin and other virtual money are making any effort to be climate-friendly.

We believe it’s a straightforward step for Bitcoin miners to develop into climate-neutral operations, and they’re ideally situated to develop a new kind of climate certification that could spread to other sectors of the economy.

Because Bitcoins are the result of a huge amount of computer calculations that support and assure their value, the exchange of Bitcoin is accompanied by exchanges of this supporting data.

Equally, carbon offsets exist virtually. The offsets are created and stored electronically, and can even be retired electronically. Trusted registries and exchanges exist to allow them to be verified, held in accounts and traded.

And since each offset has its own unique electronic identity, it would be a simple task to attach as many carbon offsets as would be needed to neutralise the climate impact of each Bitcoin. Far-sighted miners could even create a new class of “green Bitcoin” that might attract a premium over the standard currency.

The same could be done with renewable energy certificates. By engaging a renewable power supplier, or buying only energy that has been generated with zero-carbon technology, Bitcoin miners could again attach digital “tags” to their currency that highlights the carbon-neutral credentials of their output.

What’s clear is that, as has happened in many other sectors of the global economy, digital currencies are likely to come under greater scrutiny by potential investors and users. And with climate issues set to remain at the forefront of global attention, Bitcoin miners should consider ways to deal with the significant climate impact that their creation involves.

By Allcot Group