Although investors and companies shift their focus to sustainability and climate change, the huge carbon footprint left behind by cryptocurrencies poses a huge risk, especially Bitcoin.
Carbon footprint as much as Argentina or New Zealand
Studies reveal that the cryptocurrency consumes as much energy as any data center around the world. The steady rise in the price of Bitcoin since the beginning of 2021 may have caused it to have a carbon footprint on par with that emitted by all of Argentina or New Zealand.
A Bitcoin transaction is equivalent to the “carbon footprint of 735,121 Visa transactions or 55,280 hours of YouTube views,” according to a Bitcoin Energy Consumption Index created by Dutch economist Alex de Vries.
In summary, Bitcoins are created by “mining” produced by computers that make complex calculations. There is a positive correlation between the number of BTCs created and the time it takes to release new ones. The more BTC is mined, the more electricity is used.
Most of the mining cost goes to electricity
De Vries estimates that about 60% of the Bitcoin mining cost is spent on the amount of electricity used. However, the economist explains that the use of energy in cryptocurrency is lagging behind as it takes longer for miners to buy new hardware.
Undoubtedly, this is expected to lead to a significant increase in energy use in the short term due to Bitcoin’s recent price increase, and as a result, incumbent miners are likely to invest more in hardware to speed up the process.
Along with Bill Gates, many skeptics are seriously concerned about the issues and question whether this huge environmental cost is worth it. “It’s not a great climate issue,” Gates said, declaring that “Bitcoin uses more electricity per transaction than any other method known to man.”
This undoubtedly raises a crucial question that several companies are struggling to identify: Is Bitcoin’s success threatened by the action of stakeholders and investors who are predisposed to invest in companies that prioritize social, environmental and governance issues?
Is it ironic that Tesla bought BTC?
Big companies like BlackRock, the world’s largest money manager, announced that their investments will be weighed heavily on how they will tackle the climate challenge. More importantly, investors are increasingly calling on companies to fully disclose their carbon footprint as global standards begin to set.
Other companies, such as Jack Dorsey’s Square company, which has invested heavily in Bitcoin, and Tesla, owned by Elon Musk, may face questions about how Bitcoin holders can affect their own sustainability scores. This is a particularly striking issue, as Tesla’s main premise is to contribute to the reduction of climate change by reducing carbon emissions.