Viewpoint丨Can the value of Bitcoin cover the environmental costs of mining?

Bitcoin remains a highly controversial topic. The world's most important cryptocurrency has been one of the biggest disruptors in the financial sector over the past decade. However, there are still many concerns about Bitcoin, especially about the impact that Bitcoin mining may have on the environment.

(Image source: flickr)

The large mining pools that support the Bitcoin network consume a lot of energy when they run. A recent report released by LongHash shows that according to Digiconomist data, Bitcoin's carbon footprint is roughly the same as that of New Zealand. This is a reality that we need to face, and at the same time, it is also a dangerous signal for many potential cryptocurrency adopters.

Nic Carter, partner at Castle Island Ventures, expressed his views on the environmental costs of Bitcoin mining in the latest episode of the podcast "What Bitcoin Did." He emphasized that other resources such as gold also consume a lot of energy in the mining process, just like Bitcoin.

He said:

It costs a lot of money to mine gold, and some people might say that it is a waste to waste a lot of machinery to get gold out of the ground, as it is just an inert metal. Miners have to dig the gold out of the ground, put it in a safe, and have people guard it. People value gold, and although it is "wasteful" to mine, transport, and store it, it is a waste not to mine it.

Carter mentioned that the case of Bitcoin can be argued in a similar way. He said that Bitcoin is valuable and not mining Bitcoin is a real waste. He said:

Bitcoin is valuable, and its total market value is around $200 billion. This is also a sign that the world thinks Bitcoin is important and valuable. The value of Bitcoin has been growing steadily over the past 10 years. In fact, although mining Bitcoin requires some energy or cost, you can think of it as a 'waste', but the world recognizes and values ​​the existence of Bitcoin, so it would be a waste not to mine Bitcoin.

China’s large hosted mining pools play a very important role in Bitcoin mining. In fact, the top five Bitcoin mining pools are operated in China.

Source: CoinDance

When talking about the energy used by these mining pools, Carter said:

Some Bitcoin mining machines use thermal energy from burning coal to generate electricity, but in fact most mining machines are hydroelectric. This is partly because there are a large number of hydroelectric power stations built in Sichuan, China, and the electricity from many power stations would be wasted if it is not used for mining.

Carter went on to say that Bitcoin is valuable and important, which is why he can "tolerate" the cost of mining. For those who value the value of Bitcoin, the cost of mining is reasonable. However, from a purely environmental perspective, the energy consumption caused by Bitcoin mining will continue to soar.

According to Digiconomist’s Bitcoin Energy Consumption Index, Bitcoin’s electricity consumption has been rising since 2017. Currently, Bitcoin’s annual electricity consumption is about 77.78 TW/h, which is close to the total electricity consumption of the entire country of Chile.

Source: Digiconomist

In addition, due to the technological advancement of Bitcoin and the increase in mining difficulty, a large number of obsolete mining machines will be generated. As mining machines are eliminated every 1.5 years and the obsolete mining machines have no other use, this is also a problem that needs to be solved urgently.

Source: Digiconomis

Although mining Bitcoin raises environmental issues, we still have to consider whether cryptocurrencies like Bitcoin have greater value that can cover the environmental costs they generate.