Can Bitcoin use less energy? The question seems to be on everyone’s mind at the moment one day after Tesla boss and SpaceX CEO, Elon Musk, said that the electric carmaker will resume allowing bitcoin transactions when miners who verify transactions use more renewable energy. In May, months after saying that electric vehicle company Tesla announced it would accept Bitcoin as a payment for its cars, Musk backtracked, saying that he decided Bitcoin mining wasn’t ‘clean’ and he didn’t want his decision to come at an environmental cost. A month later, in June, Musk has gone back on that comment. “When there’s confirmation of reasonable clean energy usage by miners with positive future trend, Tesla will resume allowing Bitcoin transactions," he said in a tweet. Bitcoin rose 5.1% to $37,360.63 at 1810 GMT (2:10 p.m. ET) on Sunday, adding $1,817.87 to its previous close, after Musk’s tweet.
In end may, Musk had revealed that he spoke to North American miners apparently, had the solution to the very problem he had mentioned in his reason for Tesla to drop accepting Bitcoin as a payment method, saying that, “They committed to publish current & planned renewable usage & to ask miners WW to do so. Potentially promising."
Is it potentially promising, though? Musk appears to have set the bar a bit too high. Bitcoin and most other cryptocurrencies rely on ‘blockchain’ technology. Blockchain is a shared database of transactions, with entries that must be confirmed and encrypted. The network is secured by individuals called ‘miners’ who use high-powered computers to verify transactions, with bitcoins offered as a reward. These computers consume enormous amounts of electricity.
The amounts of energy are more than something which can be easily changed. Last month, a study in Nature journal revealed that about 40% of China’s bitcoin mines are powered with coal, while the rest use renewables. These coal plants themselves are so large they could end up undermining Beijing’s pledge to peak carbon emissions before 2030 and become carbon neutral by 2060. The study also found that unchecked, China’s bitcoin mines will generate 130.5m metric tons of carbon emissions by 2024 – which is close to the total annual greenhouse gas emissions of Italy or Saudi Arabia. A Forbes Advisor report stated that, “If Bitcoin were a country, it would rank in the top 30 worldwide for energy use." China currently powers nearly 80 per cent of the global cryptocurrency trade.
One way to potentially reduce energy consumption would be to move away from the processor-intensive “proof of work" model, similar to changes being considered for the Ethereum cryptocurrency. But that could make its network less secure and decentralized.
Bitcoin miners use lashings of energy to generate a new coin every 10 minutes or so. A Cambridge University study pegs usage at an annualized 110 terawatt hours, roughly the electricity output of the US state of Virginia. One crypto report estimated renewable energy made up 39% of the mix last year. Another, in 2019, claimed bitcoin is already mostly green.
A contributor piece in the Harvard Business Review in May, spoke about how, “As with every other energy-consuming industry, it’s up to the crypto community to acknowledge and address these environmental concerns, work in good faith to reduce Bitcoin’s carbon footprint, and ultimately demonstrate that the societal value Bitcoin provides is worth the resources needed to sustain it."