The trio of Jack Dorsey, Cathie Wood, and Elon Musk are advocating the idea that Bitcoin mining is actually good for the planet. that is not true.
The basis of this idea is that mining cryptocurrency consumes a lot of electricity and can be deployed at any time. This can help developers mint coins to make money when there is a lot of wind or sunlight but not much power demand. Better use of wind and solar power, in which case power generation can be intermittent, can increase efficiency, lower prices, and help encourage green transitions.
The theory is based on trends that have occurred, and has nothing to do with encryption. The price of renewable energy has plummeted, and the share of energy supplied by electricity continues to increase. There are many incentives, and the International Energy Agency predicts that wind and solar will account for about 12% of electricity demand by 2030, up from 5% in 2019.
Wood said that new research ideas-in a paper by her ARK Investment Management LLC and Dorsey’s Square-debunk the myth that Bitcoin mining is destroying the environment. Dorsey stated on Twitter that Bitcoin “incentivizes renewable energy.” Musk answered with one word: “True”.
However, there is still the fact that mining consumes a lot of electricity. Citigroup (Citigroup) stated in a recent report that the current consumption of electricity by the Bitcoin mining industry is 66 times that of 2015. The University of Cambridge’s Alternative Finance Centre estimates that it consumes more electricity each year than the Netherlands.
Green power arm
To further encourage renewable energy, crypto miners can sign long-term agreements to purchase green power. This is what big companies like Amazon do to help reduce their carbon footprint. It has helped promote the prosperity of American renewable energy assets.
In their research, ARK and Square proposed that renewable energy projects can be built without grid connection, only to power Bitcoin operations. This will speed up development, but since grid connection may never be achieved, it makes the project more risky in the eyes of the lender, thus making development completely dependent on mining.
But part of the reason for the rapid decline in renewable energy prices lies in cheap financing. A bank may want to charge a higher interest rate for projects that plan to sell electricity to Bitcoin miners, rather than if the customer is Google.
Albert Cheung, BNEF’s head of analysis, said: “I don’t know how you assess the risk profile of the Bitcoin mining business.” “You kind of want the thief to survive for 20 years, or at least 10 years.”
Currently, the most polluted electricity is producing large amounts of Bitcoin. Research by the Alternative Finance Center shows that the Bitcoin mining industry is dominated by China, and China is currently promoting the prosperity of new coal-fired power plants. In the second quarter of 2020, according to the latest data, as many as 65% of gold coins were mined by the world’s largest pollution source.
In contrast, Iceland and other Nordic countries were once considered a green haven for Bitcoin, but each country produces less than 1% of coins. Their traditional geothermal, hydro and wind surplus is rapidly shrinking. Iceland’s largest utility company stated that no one will increase power generation capacity to feed Bitcoin mining.
By using coal to generate electricity, most harmful carbon emissions have been rising. According to a study published in Nature Communications this month, the pollution of coin mining in China is expected to peak in 2024, and the amount of carbon dioxide released will be equivalent to that of the whole of Italy.
In addition, compared to making Bitcoin, renewable energy may be used for better purposes, such as decarbonizing existing energy needs that rely on burning fossil fuels. As Tesla and other electric vehicles replace natural gas vehicles, they will need more electricity. Other major polluting industries, such as steelmaking, chemical production and aviation, may also use cheap green energy to produce hydrogen.
©2021 Bloomberg (Bloomberg LP)
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