by andrew ross sorkin,
“bitcoin uses more electricity per transaction than any other method known to mankind, so it’s not a big climate problem.”
Reading: Bitcoin change impact is scrutiny
that’s what bill gates told me recently.
At a time when companies and investors are increasingly claiming to be focused on climate and sustainability issues, some of them may be about to collide with the reality of another financial trend, one that is currently worth around of 1 trillion dollars: bitcoin.
also read: in a rush for bitcoin? not so fast, say corporate coffers
cryptocurrency has become inescapable, with large companies like tesla and individual investors rushing to stock up on the digital token.
but depending on which study you read, the annual carbon emissions from the electricity required to mine bitcoins and process your transactions is equal to the amount emitted by all of new zealand. or Argentina.
To put this in perspective, one bitcoin transaction is the “carbon footprint equivalent of 735,121 visa transactions or 55,280 hours of watching youtube,” according to digiconomist, which created what it calls an energy consumption index of bitcoin.
(Critics of this comparison point out that the average bitcoin transaction is worth about $16,000, while the average visa transaction is worth $46.37, but you get the point.)
And as bitcoin becomes more popular, the more resources its ecosystem consumes. what’s going on, in a nutshell: so-called miners verify transactions involving cryptocurrency by using computers to solve increasingly complex mathematical equations. they earn bitcoins for their work, which means that the more popular the currency becomes, the more competition there is to mine new tokens.
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“As the resource intensity of running bitcoin has increased in recent years, it has become a serious concern for its possible impact on health and the climate,” wrote alex de vries, a data scientist who put together the index. energy research and amp; social sciences.
All of which raises a crucial question: Does the movement among investors toward companies that rank high on environmental, social, and governance issues pose an existential threat to bitcoin’s success?
after all, laurence fink, chief executive officer of blackrock, the world’s largest money manager with $9 trillion under management, has said that all future investments the company makes will be evaluated, in part, depending on how they are planned. to meet the climate challenge. Perhaps more importantly, investors are clamoring for companies to disclose their carbon footprint, and a group called the Task Force on Climate-Related Financial Disclosures is working to create a global standard.
If that’s the case, how will investors view PayPal, which has been a strong supporter of climate initiatives but last fall announced plans to allow customers to transact in bitcoin?
or what about square, the payments company founded by jack dorsey? he has become one of the most public defenders of bitcoin, both in handling transactions and keeping the cryptocurrency in his own balance. holds about 5% of its cash reserves in bitcoin, the price of which has historically been very volatile.
Then there is tesla, a company whose premise is to help reduce climate change by reducing carbon emissions, which has invested more than $1.5 billion of its balance sheet in bitcoin. how would your bitcoin holdings affect your sustainability score?
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Other companies are also considering adding bitcoin to their balance sheets. And financial firms such as Guggenheim Partners have already invested in Bitcoin, while New York Mellon Bank says it will start funding Bitcoin transactions.
even fink’s blackrock has begun, in the words of one senior executive, to “dabble” in cryptocurrency by potentially allowing two of its funds to invest in bitcoin futures. Rick Rieder, the firm’s chief investment officer of fixed income, cited investor interest in the asset and its growing adoption by younger, tech-savvy clients.
So far, bitcoin’s carbon problem hasn’t slowed its price, which hovered around $50,000 per token on Monday night, down from $8,000 a year ago.
Your carbon problem is no secret. as the independent recently noted, hal finney, one of the early cryptologists, posted on twitter in 2009: “thinking about how to reduce co2 emissions from a widespread bitcoin implementation.”
Will owning bitcoin become a status symbol, or a scarlet letter for a new generation of climate-focused investors aware of the challenges it poses?
See also: Is Bitcoin Mining Profitable in 2022 – Forbes Advisor
the answer is complicated.
Bitcoin supporters say estimates of its carbon footprint are exaggerated. And if the computers that mine and help transact bitcoins are connected to a power grid that uses wind and solar power, they add, mining and use will become cleaner over time.
“We believe that cryptocurrencies will finally be powered entirely by clean energy, eliminating their carbon footprint and driving the adoption of renewable energy globally,” Dorsey of Square said in a statement as part of his company’s commitment to go zero. net in carbon emissions by 2030. The company has committed $10 million to invest in new “green energy technologies within bitcoin mining, and aims to accelerate its transition to clean energy.”
also read: bitcoin in your balance? this is all you need to know
On this point, gates, who considers himself a bitcoin skeptic unrelated to climate issues, said it’s possible the challenges could be overcome, but he wasn’t convinced yet.
“If it’s green electricity and it’s not displacing other uses, eventually, you know, maybe it’s okay,” he said.
Several companies are working on some counter-intuitive ideas to turn bitcoin green. On Monday, seetee, an investment company involved in cryptocurrencies, said it planned to invest in “bitcoin mining operations that transfer stranded or intermittent electricity without stable demand locally (wind, solar, hydropower) to economic assets that can be used anywhere”.
In other words, the company plans to build wind and solar power in places that might not be perfectly located for the technology and will use the extra power to mine bitcoins, making money in the process. “Bitcoin is, in our eyes, an economical charge-balancing battery, and batteries are essential to the energy transition required to achieve the goals of the Paris Agreement,” the company said in its announcement.
There are also new ways to conduct greener bitcoin transactions. for example, users could process batches of transactions on something called a lightning network, essentially a payment channel between two users that would use less power to process transactions.
paypal also argues that these new protocols can change the carbon footprint of bitcoin: “we are not only evaluating the climate impact of cryptocurrency, which is concentrated in bitcoin, but the entire industry is evolving in the evaluation standards and measurement of potential environmental impacts and more energy efficient protocols are emerging.”
in the short term, nearly two-thirds of all bitcoin mining will take place in china, and “mining activities can also be found in regions with coal-fired power generation, such as in inner mongolia province According to a study in the scientific journal joule, which also raises the idea of imposing a carbon tax. “regulating this largely gambling-driven source of carbon emissions appears to be a simple means of contributing to the decarbonization of the economy.”
As for fink of blackrock, he said he was still skeptical about the idea of bitcoin, even before he could contemplate climate issues. “We’re looking at it,” he said. “Right now I’m more focused on effectiveness.”
See also: Bitcoin Evolution: opiniones sobre el bróker en 2022
