To understand why digital currencies may harm the environment, you should first know how bitcoin is produced (which occupies a share of about 40% of the crypto market, and naturally attracts most of the attention): Issuing a new bitcoin is actually adding a digital block to the existing chain, based on the Blockchain technology that guarantees absolute reliability. In order for a person to be able to add such a digital block, he is required to solve a complex mathematical puzzle. More precisely, a computer in his possession solves the same puzzle – and for that the computers need powerful calculation powers, which obviously translates into high electricity consumption (both of the processors and of the cooling systems of the computers).
It is also worth knowing that the world of Bitcoin was designed so that over the years the puzzles will become more and more complicated. The result: the electricity consumption in the “mining” process – as the production of Bitcoin is called, to illustrate the comparison with gold in the old days – is increasing. As of 2022, more electricity is required to produce Bitcoin than to satisfy all needs in advanced countries such as the Netherlands, the Czech Republic, Sweden and Finland. In fact, close to a third of the total electricity consumption in the world is directed to the production of Bitcoin!
Another fact that makes the problem worse is the places where Bitcoin is mined. In order to lower the economic cost of producing the popular digital currency, mining is done in places where electricity is cheap. In these places, electricity production is based mainly on coal and oil, as well as natural gas – which cause much greater environmental damage than renewable energies (wind, water, solar).
The excess air pollution due to Bitcoin mining, and additional damage in the form of overloads on local power grids, have led various countries to impose real restrictions on this activity. Iran, for example, suffered from frequent power outages due to the intensity of Bitcoin mining. In the beginning, the authorities encouraged the production of Bitcoin as part of dealing with Western sanctions, and at one point about 5% of the world’s cryptocurrency mining was done in Iran. Pirate miners, most of whom are not residents of Iran at all, flooded the country and caused power outages and great resentment on the part of the citizens – until the authorities banned mining in the country.
In China, one of the main goals of the National Economic Planning Agency, as part of the commitment to meet climate goals, is the cessation of cryptocurrency mining (according to various estimates, most of the world’s mining takes place in the territory of the giant country today – about 60% of the total number of digital currencies). Ways to deal with the polluting phenomenon are also being explored in various European countries.
The desire to take advantage of the benefits of decentralized currencies on the one hand, and on the other hand to reduce as much as possible the damage to the environment and the quality of life of the human race, leads to the development of green solutions. One example is a start-up by an American named Bill Spence, who previously founded a company for the removal of toxic physical waste (toxic metals, coal, etc.) and now seeks to clean the world of the air pollution caused by crypto mining – by developing more efficient technologies for producing digital currencies.
Another example comes from El Salvador. The small, poor country in Central America, which was the first to approve Bitcoin as a currency for any purpose, is developing environmentally friendly mining, based on geothermal energy, near one of its volcanoes. A similar attempt was also made in Iceland, and it is hoped that the human race will be able to find the right balance between the innovative currencies and the preservation of the planet we live on.
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