Vigorous mining of cryptocurrency is frowned upon for its growing environmental impact. The industry’s goal of carbon neutrality seems out of reach.
We know that Bitcoin is sensitive to ad effects. A few weeks ago, a simple tweet from Tesla founder Elon Musk caused the price to skyrocket by announcing the possibility of paying for vehicles with cryptocurrency. In May, the promoter turned into a gravedigger. On the same social network, he stated that he was refusing to accept bitcoins, which led to a drop of more than 20% in a few days.
Reason for this turnaround: the impact of cryptocurrency on the environment. This industry, which is dominated by Chinese mining farms (huge hangars connecting hundreds of dedicated computers), really requires the competition of gigantic computing power to power transactions.
The Elon Musk case is just the hundredth episode of the controversy that has been fueling the Internet since the fall of 2020 amid soaring prices and electricity consumption by cryptocurrencies. At 38,000 francs per unit, Bitcoin will consume 140 TWh per year, or 0.7% of the world’s electricity, according to a Cambridge University report. The latter notes that 61% of mining activities are still carried out using fossil fuels.
Price and power
Ludovic Thomas, a mining pioneer in Switzerland and now the head of the Blockchain Network consulting firm, describes a price-driven race for power: “The more transactions in a block, the higher the price and the more revenue increases as the block miner touches 6.25 bitcoins in addition to the transaction fee for this block. Thus, the more competition I have, the more energy is consumed. At $ 50,000 per bitcoin, even if electricity costs 50 cents, we would be profitable. That’s why everyone does it, and the equipment manufacturers are out of stock. “
However, an increase in the required power does not mean a proportional increase in energy consumption, – recalls Ludovic Thomas. “The energy efficiency of the equipment has quadrupled in four years. But since the available capacity was seven, the consumption was almost doubled. ”
The controversy escalated in January over a power outage in Iran. In a matter of months, the country has become a major player in mining, in particular by locating displaced Chinese farms. He jumped at the chance to convert his oil resources into bitcoins, and the government can bypass the embargo by conducting anonymous transactions using a well-known cryptocurrency.
For Yves Bennaim, a Geneva-based bitcoin specialist, the Iran case was disproportionately covered: “The problem of power outages in Iran stems from irresponsible government policies. In the United States, we produce on-the-fly, in part by generating surplus electricity from hydroelectric plants or methane emissions typically burned by the oil industry. Finding the best price is a factor of efficiency. “
Achieving blockchain carbon neutrality by 2040 is the stated goal of the Crypto Climate Agreement promoted by the Zougoise Foundation Energy website in April this year and bringing together about twenty players in the sector. The announcement came just in time to end the controversy, but did not fully convince Ludovic Thomas, a longtime green energy miner himself: “The idea of blockchain running on surplus green energy is real. but also a bait. In truth, the blockchain has to work all the time, it is not a storage solution. We see this in China, where the government encourages mining with hydropower. When dams are low, miners migrate near coal-fired power plants. And this is even if we see on large European farms that green energy is competitive at a price of 3 cents per kWh. “
10 times more electricity in the world
The issue of mining consumption is even more troubling as the use of cryptocurrency as a means of payment remains very limited and largely speculative. A Bitcoin transaction currently consumes 700 kWh compared to 150 kWh for … 100,000 visa transactions. A quick calculation would lead to the conclusion that it would take more than 10 times the world’s electricity to replace 185 billion annual visa transactions with bitcoin transactions.
However, Yves Bennaim cautions against oversimplification that is considered oversimplified: “You have to understand that with a single Bitcoin transaction, you can reach several hundred users for the same energy cost. You should imagine that in the early days of the phone, a line was drawn between each user. As the development progressed, the links were streamlined and merged. “
The specialist notes that devices left on currently consume 10 times more than Bitcoin with zero utility: “Bitcoin is political, the financial revolution he promised is receiving criticism. But this revolution will not happen overnight. Energy efficiency will have time to adapt. When I see a mining farm today, it reminds me of the IBM of the sixties, those whole machine rooms that sent people to the moon. However, that processing power of that time is contained in a smartphone today. ”