Cryptocurrencies have been very much in the public consciousness recently. There has been growing media, and now legislative, attention paid to cryptocurrencies. This has largely arisen out of a surge in the value of several currencies, most notably Bitcoin. The underlying mechanisms, both financial and technical, responsible for the massive fluctuations in value that Bitcoin has experienced are too complex and hotly debated to be covered here.
Suffice to say that Bitcoin, and other cryptocurrencies, have been undergoing these seismic shifts in value routinely for some time now. But while there is now a fairly good general awareness of the perceived financial value of Bitcoin, little attention has been paid to the other costs involved in producing, or ‘mining’, Bitcoin.
Mining is the process by which Bitcoins are created. Again, a full technical explanation of what mining involves is beyond the scope of this article. What is important to know is that the more computing power you have, the more efficiently you can mine. This is analogous to mining a physical resource from the ground as having more power available to you means that you are able to overcome your obstacles, in this case, the Earth itself, to reach the resources you want.
Obviously, with Bitcoins being worth thousands of dollars, if mining them was something that anyone could do with ease, more people would be doing it. With cryptocurrencies gaining legitimacy on a number of exchange platforms – see Crypto Head for more info. As it is, while anyone can purchase the hardware needed to mine Bitcoin, in most cases you will pay more in electricity bills than the value of the currency you ultimately mine.
The vast majority of Bitcoin mining is now being carried out in China. Part of the reason for this is that the Chinese government has made cheap hydroelectricity available for Bitcoin mining farms. These farms consist of a large number of computers pooling their power and working together in order to mine Bitcoin.
As stated earlier, the more electricity available, the more intensive the resulting mining will be. Therefore, in these parts of China where Bitcoin is being mined in an industrial scale, subsidized by the state, the scale of the mining far outpaces any other operations, anywhere else in the world.
An Unsustainable Future
The amount of electricity currently being used for cryptocurrency mining across the globe every year is equivalent to the amount used by an entire nation-state. An individual using the highest end hardware available to the home consumer market would be able to mine one Bitcoin every 98 years or so.
The only viable bitcoin mining operations are being underwritten by nation states who can offer cheap and virtually unlimited electricity to mining operations. The environmental cost of Bitcoin is the same as the environmental costs of producing the electricity required to mine them.
The environmental costs of cryptocurrencies is something that hasn’t received much attention until now, but which could have a significant impact on the long-term viability of cryptocurrencies.