The fall in the value of bitcoin in May began after Tesla CEO, Elon Musk, said he would no longer accept payment for electric vehicles with the cryptocurrency. The argument, at the time, was that bitcoin consumes too much energy in checking transactions, a process called mining. According to the businessman, this would have bothered the company’s shareholders, who have clean energy as their motto.
However, to what extent does mining actually, represent high energy consumption? For Transfero’s Director of Products and Partnerships, Safiri Felix, putting this consumption in the right perspective is necessary. “Bitcoin does not consume much energy, especially when compared to the financial system as a whole. All major industries consume energy; in practice, bitcoin is stimulating the development of more efficient and more sustainable energy sources”, he said.
According to him, we need to understand the benefits that this technology can bring to society. “It is a very efficient trade in the exchange of electricity for a scarce digital asset with high liquidity”, he said. And increasingly, the trend is for mining to be done with renewable energy.
Even so, there are still several myths surrounding the cryptocurrency’s supposed excessive energy consumption. Check out some truths and lies on this topic below.
Myth: bitcoin wastes energy
While traditional money is issued by banking institutions (which require energy and other expenses), bitcoin is issued by algorithms whose rules are part of their protocol. In the mining process, miners spend real energy on computing, which leads to a financial cost.
Thus, in fact, there is energy consumption. However, this cannot be considered waste but an investment for the technology to work safely.
Myth: the energy expended by mining is unknown
Since 2015, Cambridge University has maintained a system that estimates bitcoin’s energy consumption in real-time. The mechanism highlights that in some countries, including China, mining operations tend to be concentrated in places where renewable energy is produced.
Truth: energy consumption does not mean increased emissions
The energy consumed by the system is not proportional to the carbon emissions in the atmosphere. Through geolocation data, it is possible to know where the miners are located. A good part of them is in regions close to clean energy sources. Even the amount of the energy generated by the Itaipu hydroelectric plant is used for mining. And there is no doubt that hydroelectric power has less impact than that derived from fossil sources.
Truth: the crypto market is committed to climate
Inspired by the Paris Agreement, the Crypto Climate Accord aims to reduce the carbon footprint of bitcoin. The goal is to achieve zero emissions by 2030. In addition, miners have created a council (Bitcoin Mining Council) to discuss the use of clean energy.
Truth: Ethereum will reduce energy consumption
Ethereum will introduce new ways to produce tokens, which should reduce energy consumption.
The expenditure is still high, but the next update is supposed to change the PoW (Proof-of-Work) system to PoS (Proof-of-Stake), leading to the consumption being cut by more than 90 percent. Moreover, Proof-of-Stake consumes only a fraction of the power of PoW, promising the same security and stability advantages