A recent tweet by Elon Musk, CEO of Tesla, saying Bitcoin mining consumes a lot of energy and it is a cause for concern for the environment, tumbled the price of the cryptocurrency.
It is a known fact that Bitcoins are traded on crypto exchanges 24X7 round the year without a break. Environmentalists and activists have been raising concerns about the adverse effects of Bitcoin mining on the environment and how cryptocurrency has been using fossil fuels.
What is Bitcoin Mining
Bitcoin mining is a method of generating new coins in which computers are used to solve complex mathematical formulas or puzzles. As Cryptocurrencies are built on a decentralized network these must be mined in order to function. The Bitcoin mining software takes about 10 minutes on average for those on the network to solve the complex programme and process a block.
Is it bad for the environment?
As miners use large and efficient systems to mine blocks and validate transactions, this consumes tremendous amounts of electricity. Also, miners receive newly generated Bitcoins as well as transaction processing fees in exchange for their services.
What is the connection between Bitcoin mining and fossil fuels?
The crypto world is largely dependent on fossil fuels. Cryptocurrency mining often uses electricity produced from fossil fuels. As the price of Bitcoin increases, so does the amount of energy consumed as miners mine coins with the price rise, attracting more users to join the Bitcoin network.
A University of Cambridge study has stated Bitcoins consume more than 120 Terawatt Hours (Twh) each year.
Who leads the pack when it comes to energy consumption
In a report published by Galaxy Digital and confirmed by International Energy Agency (IEA), the annual electricity consumption of the Bitcoin network stood at 113.89 terawatts per hour per year (TWh/year) whereas, the banking systems consume 263.72 TWh/yr while gold mining consumes around 240.61 TWh/yr of energy. In effect, traditional banking systems or even gold mining consume twice the energy of Bitcoin mining.