After reaching a record price of US$58,000 in February, Bitcoin has been gaining unprecedented interest. But there's a dark side to this digital asset, because its creation is highly energy intensive, explains Dutch economist, Alex de Vries.
Bitcoins are created -- or "mined," as the experts say -- in farms comprising thousands of computers running, flat out working on complex calculations. And this process uses a lot of energy.
Previous research -- including one study from the University of Hawaii, published in Nature Climate Change in 2018 -- suggests that the technology involved in mining Bitcoin could generate gargantuan carbon emissions.
According to the study, given its high energy needs, if Bitcoin follows the rate of adoption of other broadly adopted technologies, the cryptocurrency alone could produce enough emissions to raise global temperatures by 2°C within less than three decades.
In an article available on the Joule website, the economist Alex de Vries estimates that the entire Bitcoin network could consume up to 184 TWh per year, close to the amount of energy all data centers consumed globally. This would result in a carbon footprint of 90.2 million metric tons of CO2, which is roughly comparable to the carbon emissions produced by the metropolitan area of London.
"That's a pretty mind-blowing number," says Alex de Vries. "Those data centers serve the most of global civilization, and then there's Bitcoin, which serves almost no one but still manages to consume about an equal amount of electricity." He also highlights the relatively short shelf-life of Bitcoin mining equipment, which may contribute to significant quantities of electronic waste in the coming years.
To limit the negative impacts of Bitcoin on the planet, Alex de Vries suggests several potential courses of action, such as taxing Bitcoin mining device manufacturers or regulating cryptocurrency exchange platforms.
The economist also urges caution over the uncertain future of Bitcoin, given the limited information currently available about the cryptocurrency: "Who knows what will happen in 2024? Maybe everyone is using Bitcoin, maybe nobody, maybe everyone forgot about it could also be the case."