We live in the center of all things "disruptive." For example, think about Facebook, Google, and Twitter and how these services have changed how we communicate—or not communicate—with one another. Technology is morally neutral, but how we use it makes the difference between a healthy economy and one that is not healthy or sustainable.
A recent headline in the New York Times online from September 3 asks tough questions about one of the latest disruptions to our economic life, cryptocurrency: "Bitcoin Uses More Electricity Than Many Countries. How Is That Possible?" The designers of cryptocurrencies created an easy way for an individual to make financial transactions that don't involve a third party, such as a bank. The value of one Bitcoin currently stands at nearly $60,000. But the price fluctuates, making them an excellent place for financial speculation. Some have compared cryptocurrencies to gold.
The first "mining" of Bitcoins began in 2009 by a group or a person operating under the name Satoshi Nakamoto. Nakamoto's original idea was to offer simple, safe, and secure electronic financial transactions between individuals that would depend on renewable energy for power. This isn't currently the case. An editor at Forbes Advisor, John Schmidt, estimates that only 39% of the energy to run Bitcoins comes from renewable energy.
The Cambridge Bitcoin Electricity Consumption Index estimates that Bitcoin uses about 110 Terawatt-hours of power every year. As a comparison, the U.S. Energy Information Agency estimates that the average U.S. household uses 30-kilowatt hours of energy every day, or about 0.11-Megawatt-hours in a year. Some estimate that each Bitcoin exchange uses more than $100 worth of power when considering the price of electricity to be $0.09 per kilowatt-hour, a worldwide average.
Why does Bitcoin use so much energy? The inventors of the system wanted to make a stable system that would be hard to misuse. They made it difficult to add or subtract a Bitcoin from a "blockchain," a kind of record of Bitcoin transactions. Bitcoin miners compete with each other to move Bitcoin, and for every transaction, the miner gets a cut of the value. So as the number of miners increases, Bitcoin adds more complicated equations for them to solve. Computer expert Greg Ward adds," They've essentially created a giant make-work project to solve a simple problem, which is making sure no one can spend the same bitcoin twice."
To compete, miners use more and more powerful and energy-intensive computer equipment to make a transaction. It takes up to 10 minutes to complete one Bitcoin transaction compared to the nanoseconds it takes for traditional financial transactions. When it comes to computers and cryptocurrency, time is money—and energy. Lots of it.
Cryptocurrency is a work in progress, and like all technology, we have to weigh its benefits against its deficits. And there are crypocurrencies that are attempting to be more energy-efficient. However, Global Climate Change and the environmental harm it causes require that we significantly minimize cryptocurrency's energy deficits.
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