If environmentalists are generally not in favor of using cryptocurrencies, it is because those who use the method called proof of work consume a lot of energy. Among the cryptocurrencies that use this method to validate transactions is Bitcoin.
And while some people have been able to make significant profits by speculating on the value of Bitcoin, when the trend was up, others have made it through another activity: mining. By solving math problems to validate transactions, miners also earn Bitcoin.
The higher the value of Bitcoin, the more attractive the business is. Thus, according to data shared by the Digiconomist website, in 2021 the amount of energy used for Bitcoin mining skyrocketed.
Bitcoin’s energy consumption would indeed have gone from 77.8 TWh per year in January 2021 to 204.5 TWh per year in January 2022. Then, the value of the cryptocurrency plummeted.
While BTC crossed the $ 60,000 mark in October 2021, today it is struggling to stay above $ 20,000. And as Digiconomist estimates show, Bitcoin’s power consumption has recently plummeted dramatically.
At the beginning of June, in fact, it would have gone from 204.5 TWh per year to 131 TWh per year, or a decrease of over a third. Good news for the climate? Not really. In fact, BTC’s energy consumption is still comparable to that of a country like Argentina. And according to our Guardian colleagues, a single transaction still consumes as much as an average American family for 50 days. Furthermore, despite the crypto crash, this consumption has not yet fallen to the level of January 2021.
Consumption decreasing, but still very high
Either way, the logic is simple. The less value Bitcoin has, the lower the incentive for cryptocurrency miners.
Alex de Vries, the Dutch economist behind Digiconomist, explains that the collapse of cryptocurrencies would put some miners out of business, particularly those using non-optimized equipment or those operating in suboptimal conditions (for example, due to poor cooling). .
“For bitcoin mining equipment, this is a big problem, because these machines cannot be reused to do other things. When they are not profitable, they are useless machines. You can keep them hoping that the price will recover or sell them for scrapping “also pointed to the economist, quoted by The Guardian.
Bitcoin’s energy-intensive side is often emphasized. In May, the boss of the FTX platform, Sam Bankman-Fried, had aroused many reactions by explaining that Bitcoin does not have the necessary scalability to become a real payment network.
“The things you do millions of transactions with per second have to be extremely efficient, light and energy efficient.”the CEO of FTX had also stated, before adding that cryptocurrencies that work with the (much less energy-intensive) proof-of-stake method meet these criteria.
For him, Bitcoin would rather be a commodity or store of value, like gold. For his part, Ethereum could take a different path. The crypto, in fact, should move from the proof-of-work method to the proof-of-stake, which would allow the latter to drastically reduce its energy consumption.