Bitcoin and The Environment

All the sources utilized are at the bottom of the essay for whoever wants to learn more. The platforms I use most to learn about crypto news/NFTs/altcoins are Twitter, Discord, Reddit, and Instagram.

The purpose of this essay is to discuss the environmental impacts directly correlated to Bitcoin. The paper will begin by providing an in-depth description of blockchain, Bitcoin, and the mining processes. The paper will conclude with the varying ways in which Bitcoin impacts the environment.

Founded in 2009, Bitcoin has grown to become the most common of all cryptocurrencies (Dilek & Furuncu, 2019). It is a secure, direct, and rapid payment system that allows users to transfer funds via the internet (Dilek & Furuncu, 2019). Bitcoin was designed to be the premier peer to peer-based payment platform without the allowance of third-party involvement (Dilek & Furuncu, 2019).

Once Bitcoin gained popularity it was not long before competitor cryptocurrencies surfaced (Dilek & Furuncu, 2019). These competitors came to be known as Altcoins, short for alternative coins (Dilek & Furuncu, 2019). A few common Altcoins today are Ethereum, Litecoin, Cardano, and Ripple (Dilek & Furuncu, 2019).

A crucial concept instilled in Bitcoin is that it remains decentralized (Dilek & Furuncu, 2019). Thus, meaning it does not rely on government, institutions, nor fiat, unlike traditional currencies (Dilek & Furuncu, 2019). Arguments have surfaced regarding the lack of regulation that may have allowed possible money laundering schemes performed through Bitcoin transactions (Dilek & Furuncu, 2019).

Blockchain technology is what powers all Bitcoin transactions, allowing them to occur (SGSB, 2018). Bitcoin, along with all other cryptocurrencies possess their own blockchain that communicates all the past and present transaction data (Dinh, Liu, Zhang, Chen, Ooi & Wang, 2018). The blockchain is referred to as the distributed general ledger which cannot be modified (Dilek & Furuncu, 2019).

After a Bitcoin transaction is initiated, it is then sent to the blockchain to be verified (Dilek & Furuncu, 2019). When a transaction is posted to the blockchain it is stored in a block with other transactions where it must then be mined (Dinh et al., 2018). These blocks are sequentially mined by members of the blockchain community in exchange for compensation which is paid in Bitcoin currency (Dinh et al., 2018).

Mining is the transaction being confirmed and posted to the blockchain (Dinh et al., 2018). To mine, a member of the Bitcoin community must obtain extensive computer hardware (Dilek & Furuncu, 2019). This hardware must solve advanced mathematical problems that once completed allow the transaction to occur (Dilek & Furuncu, 2019). The transaction is then time-stamped and posted to the blockchain where it can be viewed by all, yet once posted never manipulated (Howson, 2021).

Bitcoin mining was once seen as profitable by many individuals, yet this is no longer the case (Dilek & Furuncu, 2019). The two greatest obstacles are how advanced mining has become and how competition has increased dramatically (Dilek & Furuncu, 2019). Large Bitcoin mining companies have invested in vast amounts of expensive machinery to mine at much faster rates than the public (Dilek & Furuncu, 2019).

There are many blockchain systems on the market that pose green benefits such as Grid Singularity and ME SOLshare (SGSB, 2018). These firms are attempting to remodel electricity grids to make electricity more affordable and environmentally cost-effective (SGSB, 2018). However, it should be concluded that Bitcoin will never be able to solely run-on renewable energy, at least not in the near term (Howson, 2021).

The computers that perform Bitcoin mining utilize a substantial amount of energy (Dilek & Furuncu, 2019). From 2017 to 2018, Bitcoin-related energy consumption increased four hundred percent (Dilek & Furuncu, 2019).  In 2018, Bitcoin mining energy consumption surpassed that of 150 countries and used an amount of energy equivalent to one percent of the continental United States’ (Dilek & Furuncu, 2019).

This astonishing amount of energy consumed throughout the process of Bitcoin mining poses an immense threat to the earth’s environment (Dilek & Furuncu, 2019). Reliance on fossil fuels such as coal in the production of energy used for Bitcoin mining proves to be the issue (Dilek & Furuncu, 2019). The biggest Bitcoin mine resides in Mongolia, China where the primary energy source is coal (Dilek & Furuncu, 2019).

It has been discovered that there is a direct correlation between Bitcoin mining emissions and low air quality (Dilek & Furuncu, 2019). The majority of Bitcoin mining takes place in China due to easy access to cheap, coal-based energy production (Dilek & Furuncu, 2019). The burning of coal releases toxic particles into the atmosphere that are proven to be detrimental to the earth’s environment (Dilek & Furuncu, 2019).

One particle produced because of coal-based Bitcoin mining is nitrous oxide (Dilek & Furuncu, 2019). An abundance of nitrous oxide dramatically lowers the air quality of the corresponding region (Dilek & Furuncu, 2019). Common side effects amongst living organisms are respiratory infections and lung diseases. (Dilek & Furuncu, 2019).

Another toxic emission produced through coal-powered Bitcoin mining is carbon dioxide (Dilek & Furuncu, 2019). A recurring common goal on an international, national, and legal scale has been the reduction of carbon footprint (Karaszewski, Modrzynski & Modrzynska, 2021). Carbon dioxide is the leading cause of global warming and the destruction of the earth’s ozone layer (Dilek & Furuncu, 2019).

The utilization of blockchain provides the power to reduce the amount of paper consumption and carbon dioxide emissions (Karaszewski et al., 2021) Electronic transactions can replace the need to document by paper along with the use of paper fiat (Karaszewski et al., 2021). Likewise, the need for transportation of these documents and gasoline-related carbon emissions will be minimized (Karaszewski et al., 2021).

Seamless payroll transactions of Bitcoin can be made on the blockchain (Karaszewski et al., 2021). The more firms that adopt blockchain for payroll will reduce the need for paper consumption (Karaszewski et al., 2021). This will allow for more trees to remain in the environment which will aid in carbon dioxide reduction (Karaszewski et al., 2021).

Bitcoin is the largest cryptocurrency and operates through blockchain technology. The environmental impacts presented showed both benefits as well as deficiencies. Coal-based Bitcoin mining and extensive energy consumption have proven a major environmental issue. On the contrary, blockchain and Bitcoin payment structures can provide a significant reduction in respect to carbon emissions.

Sources

Leaving these here for credibility & they are very much more in-depth!

Dilek, S., & Furuncu, Y. (2019). Bitcoin mining and its environmental effects. Ataturk University Journal of Economics & Administrative Sciences, 33, 91-105.

Dinh, T. T. A., Liu, R., Zhang, M., Chen, G., Ooi, B. C., & Wang, J. (2018). Untangling blockchain: A data processing view of blockchain systems. IEEE Transactions on Knowledge and Data Engineering, 30(7), 1366 - 1385.

Howson, P. (2021). Distributed degrowth technology: Challenges for blockchain beyond the green economy. Ecological Economic, 184, 1-7.

Karaszewski, R., Modrzynski, P., & Modrzynska, J. (2021). The use of blockchain technology in public sector entities management: Security and energy in cloud data. Energies, 14(7), 1873-1892.

Stanford Graduate School of Business. (SGSB, 2018). Blockchain for social impact: Beyond the hype. Stanford, CA: Author.