Bitcoin’s electricity consumption would be enough to power an entire country. According to the University of Cambridge index, at the current price, Bitcoin would require the consumption of 126.28 terawatt hours of electricity over one year. More than the annual consumption of Ukraine (124.5) or Norway (124.3), and roughly the equivalent of gold mining (131).
Because bitcoin may be a virtual currency, its impact is very real, and also requires “mining”. Like the majority of cryptocurrencies, Bitcoin works with a “proof of work” protocol, or “proof of work”, to ensure that the encrypted transactions recorded in the blockchain are authentic. With each purchase or sale of Bitcoin, the transaction must be validated. For this, someone has to use their computer computing power to solve an equation. This is the role of minors. The only way to solve these complex math problems is to try combinations, until you find the right one, and thus to continuously run the most powerful computers possible. Because only the first miner who succeeds obtains the right to validate a block of transactions, to register it in the blockchain, and is rewarded in Bitcoin. This “proof of work” method secures the network, but is also very energy intensive.
Environmental cost vs social utility
“The instantaneous consumption of Bitcoin depends on its price and therefore fluctuates a lot, explains Hugues Ferreboeuf, digital project director at the Shift Project. electricity. You can’t help worrying about it.” Because who says electricity consumption also says greenhouse gas emissions. Not to mention that the race for computing power encourages professional miners to quickly renew their equipment, which is still functional, for state-of-the-art equipment. An environmental cost that had pushed Elon Musk to give up payments in Bitcoin. While it had been possible to buy a Tesla with this cryptocurrency since March 2021, the billionaire had finally backtracked in May for ecological reasons, before specifying in June that he would accept the currency again, when it was less polluting.
Tesla & Bitcoin pic.twitter.com/YSswJmVZhP
— Elon Musk (@elonmusk) May 12, 2021
“The debate on the environmental cost of Bitcoin stems from a misunderstanding of its usefulness”, retorts Alexandre Stachtchenko, Blockchain & Cryptos Director at KPMG France, according to whom Bitcoin mining could replace gold mining, which is also disastrous for the environment, even if 5 to 10% of this gold is used in industry and therefore in the production of computers. “Bitcoin and gold are rare, time-limited and transportable, a switch from gold to Bitcoin is possible”, wants to believe the expert. If the volatility of Bitcoin makes it unsuitable for everyday payments, he believes that it could serve as a store of value for long-term savings, especially in countries where populations are poorly banked… theoretically. Because the social consensus around gold does not seem so easily replicable.
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Bitcoin and renewable energies
And for the time being, “bitcoin is added, does not replace other uses”, points out Hugues Ferreboeuf. So is the environmental cost worth it? “Today it is a mostly speculative asset and in this case, one kilowatt hour consumed for Bitcoin is one kilowatt hour too many”, slices the expert.
Bitcoin could however improve its balance sheet thanks to renewable energies, -50% of its electricity consumption would already be of renewable origin according to Alexandre Stachchenko- and by using fatal energy, now lost. Among the examples already observed, the University of Cambridge cites miners in China who consume surpluses from the hydroelectric sector during the rainy season, without competing with other uses. In the United States, miners also take advantage of the energy released by the gas burned during oil exploitation, for lack of outlets. Miners could thus make it possible to make profitable investments in renewable energies, while waiting for the maturity of the market, provided that the price of this energy is quite attractive.
Less greedy cryptos
But for many, the solution is to be found in an alternative method of validating transactions: the “proof of stake”, or “proof of stake”, adopted by several more confidential cryptocurrencies, such as Peercoin or Cardano. Transactions are always encrypted and recorded in a blockchain, but to validate them, there is no need to run energy-consuming machines to solve calculations. Operators are allowed to validate transactions in exchange for a frozen sum on a specific wallet, and are rewarded waiving transaction fees. This is another equally secure method. Validators have a vested interest in protecting the integrity of the network so they don’t lose their seed money.
After seven years of research and development, the second cryptocurrency in capitalization behind Bitcoin, the Ether of the Ethereum blockchain, announced on May 18, 2021 its intention to switch from proof of work to this proof of stake. Several times postponed, this technically very risky change for the network could take place in the coming months, around summer, confirmed Ethereum co-founder Boris Vitalik at the Ethereum Denvers event on February 18.
Enough to reduce the energy consumption of this crypto by 99.95%, assures the Ethereum Foundation. “The proof of the stake would make it possible to consume from 10 to 100 times less than the proof of work, greets Hugues Ferreboeuf. Even in the low range, we would fall into something which is no longer out of proportion.”
Alexander Stachchenko, however, remains skeptical: “the proof of stake is still in an experimental state. It has yet to be adopted by cryptos big enough to see if it works at scale. I immediately sign for a greener Bitcoin, but technically, today, it does not exist. The most ecological is to consume renewable energy and to consume the surpluses. We must mourn, Bitcoin is here to stay.”