The growth in the value of Bitcoin over the last few months has only been matched by the number of articles about this cryptocurrency.
I have a particular interest in it because my son Monty decided to share his research and his views on Bitcoin, on his website – and he asked me to help with the editing. This meant that I had to more or less understand what it was and how it worked. I was beginning to think I got the picture, when I discovered a whole new dimension, which makes it pretty unpalatable from an environmental point of view – and even more complicated.
Bitcoin mining is on track to consume ‘all of the world’s energy by 2020’, according to Newsweek. Of course that couldn’t actually happen but the statistic is based on the world’s current energy consumption and the predicted rise in energy demand for generating new Bitcoin units. It seems that even now the amount of energy required to mine Bitcoin is greater than the current energy consumption of 159 individual countries, including Ireland, Nigeria and Uruguay – and equivalent to the annual energy use in Denmark. Another dimension is that between 60% and 70% of the mining happens in China, where the main source of energy production is from coal-fired power stations.
The increase in the value of Bitcoin is likely to make this worse. It will mean that there’s more incentive to mine, more people involved in the process, more Bitcoins being produced and the mathematical problems that need to be solved will be more complicated, meaning that even more energy will be required to solve them. Crikey.
There is one light on the horizon. Apparently there will only ever be 21 million Bitcoin produced in total. Once that’s happened, will it mean that the mining will cease and the miners will simply go away or make money from processing Bitcoin transactions? I don’t think so. One of the articles I read explained that, like gold, Bitcoin was a finite resource, but then went on to say ‘unless Bitcoin’s protocol is changed to allow for a larger supply’. That’s where it really does differ from gold, which actually is a finite resource. I’ve no idea how the protocol of Bitcoin might be changed, but it sounds pretty likely that it will be. Another consideration is that Bitcoin is not the only cryptocurrency relying on gas guzzling mining enterprises – and it’s certain that more will be created.
The main focus of my environmental career has been to highlight the impacts of consumption – and encourage everyone to consume less. I can’t claim to be a beacon of virtue on this front – this could be the subject of another blog – but I’m a dedicated campaigner for reducing waste. Many years ago I was giving a speech at a conference on ‘consumption’. I was inspired by another speaker, who explained that one of the values of virtual worlds that have been created on the internet – such as Runescape and Second Life – is that people get the excitement of being ‘rich’ without the material impacts it entails. I thought that this would be the same for Bitcoin. Clearly not. How disappointing.
My eldest son, Connor, told me a couple of days ago that he bought three Bitcoins for about £5 each a few years ago, but he spent them. At today’s prices they’d be worth over £40,000. The price has more than doubled since the summer, when my youngest son, Monty, was keen on speculating. Now, it seems that everyone is trying to climb on the bandwagon or speculate on when the bubble will burst. I don’t know if it will – or when it will – but now that I understand about the energy dimension, I feel more comfortable about giving this particular opportunity a miss.
The next challenge is to create a super energy-efficient cryptocurrency. I thought this might be a job for Elon Musk, given his incredible inventiveness. Then, it occurred to me that he’s already invented Paypal. This seems to have many of the benefits of a crypto currency without the massive energy consumption that goes with it. The price of Bitcoin has increased about 20 fold in 2017, whereas Paypal’s share price increase was more modest – it nearly doubled. But, my money will be going to Paypal, because I believe it’s more sustainable. The question is, ‘can we replace Bitcoin before it destroys the planet?’
About Julia Hailes
Julia is a campaigning consultant, a writer, a speaker, a green entrepreneur and an opinion former. In 1987, she co-founded SustainAbility , an environmental consultancy and think tank, with John Elkington . Since then she has written or co-written nine books, including the million selling Green Consumer Guide.