Bitcoin (BTC) is currently the largest cryptocurrency in the world and has been for some time. And with its massive popularity comes huge electricity consumption. A recent BanklessTimes.com data presentation shows that BTC accounts for up to 77% of electricity consumed on cryptos.
The Bitcoin network currently uses between 90 and 145 billion kWh per year, of which the United States accounts for 38% of the total hashrate. As of mid-August 2022, estimates put the US share of global BTC electricity consumption at between 33 and 55 billion kWh per year, which is comparable to the consumption of some countries, states or critical energy services. .
This could have serious environmental consequences. The US crypto industry currently emits between 25 and 50 million metric tons of CO2 per year, of which the BTC network accounts for most of the emissions. The growing popularity of BTC threatens to push these emissions to dangerous levels.
Why is Bitcoin so power hungry?
Bitcoin’s high electricity consumption can be attributed to its proof-of-work algorithm and block size limit. The proof-of-work algorithm requires miners to solve complex mathematical problems to verify transactions.
This process consumes a lot of energy because miners have to use powerful computers to solve these problems. The block size limit also contributes to high electricity consumption as it requires more transactions to verify.
Recently, there have been calls for new forms of mining that do not require such an amount of electricity. There are also plans to ditch proof-of-work mining altogether and move to more sustainable models like proof-of-stake mining. If these changes are made, it could go a long way to alleviating some of Bitcoin’s environmental concerns.
Bitcoin’s link to climate conservation measures in America
As climate change continues to be an urgent global issue, it is important to discuss its potential risks and consequences. A major consequence of climate change is its financial impact. In 2021, climate disasters cost the United States $145 billion.
This number is only expected to increase in the coming years as climate change worsens. In addition, climate change is likely to reduce US GDP by 3-10% and US federal revenues by 7% per year by the end of the century.
The United States has pledged to reduce greenhouse gas emissions 50% to 52% below 2005 levels by 2030 and to achieve a carbon-free electric grid by 2035. will be on track to achieve net zero emissions no later than 2050.
Possible policy interventions
The United States must focus its crypto-asset policy on several key areas to achieve these goals. First, the policy should aim to reduce GHG emissions from crypto-asset operations. Second, it must avoid processes that will increase the cost of electricity to consumers or reduce the reliability of power grids.
Third, the policy should aim to support a clean energy transition that equitably benefits communities across the country. Likewise, it should aim to reduce e-waste and pollution and fill data gaps to better manage electricity demand.
By focusing on these key areas, the United States can develop a comprehensive crypto-asset policy to help achieve its climate goals.