Elon Musk Realised That He Can’t Champion Both Renewable Energy and Bitcoin at the Same Time — Here’s Why
Cryptocurrency mining is a virtual process and consists of complex mathematical algorithms that need computation.
The more you mine, the harder it becomes to mine further.
Many have adopted green sources of electricity like solar and wind, but the proportion is minuscule.
On Thursday morning, India time, cryptocurrency aficionados around the world read this news. Yes, Tesla’s Elon Musk just had an epiphany. He suddenly seems to have realised that Bitcoin mining needs electricity — and that too, huge amounts of it.
While we are not sure what prompted this thought in Musk’s supposedly super-intelligent brain, here is the logic behind it:
Gold is considered to be the epitome of commodities because it can neither be created nor destroyed. The quantity of gold available usually remains limited and stable, making it an excellent tool to back a currency. Since then, we’ve moved onto fiat money, but the value of gold is far from diminishing.
The mining of a cryptocurrency is a similar concept. Instead of flooding the market with coins in one go, it’s better to add a resistance factor that ensures coins seep out gradually, giving time for economies to set a value and start trading.
However, unlike the ordinary world, cryptocurrency mining is a virtual process and consists of complex mathematical algorithms that need computation. Once the breakdown is complete, you’ve just mined a coin.
But the speed at which you can mine a cryptocurrency depends on the design and computing power. The more you mine, the harder it becomes to mine further.
It’s estimated that 18.5 million bitcoins have been excavated so far, meaning an ordinary laptop can no longer get the job down. In pursuit of happiness, miners have globally bought expensive equipment ranging from top-notch Nvidia GPUs to actual supercomputers.
How do computers work? Yes, they need electricity. And this electricity is usually produced by burning coal or fossil fuels, leading to higher emissions and pollution.
China dominates bitcoin mining so far, and conventional sources generate two-thirds of its electricity. Many have adopted green sources like solar and wind, but the proportion is minuscule. Russia is also a favourable country because of its Siberian tundra, which offers natural cooling to the equipment.
Cambridge Centre for Alternative Finance, a UK-based research institute, estimates that bitcoin’s annualised electricity consumption hovers just above 115 terawatt-hours (TWh).
It further adds that Bitcoin now represents an estimated 0.59% of global electricity production or enough to power all the kettles in Britain for 33 years.
The bigger problem is, mining isn’t done on an individual scale. Miners have started taking advantage of scaling and creating mining “farms” where massive rigs with multiple processors are synced to work in tandem. While data centres worldwide help us power the internet, they consume far lower energy than mining.
TRG Datacenters says that XRP is the least damaging crypto, with the usage of 0.0079 Kilowatt-hour (KWh). Dogecoin comes in second at 0.12 KWh, followed by Litecoin at 18.522 KWh and Ethereum at 62.56 KWh. Bitcoin, the gold standard, requires a whopping 707 KWh.
Many bitcoin enthusiasts say that mining’s adverse effects shall be negligible compared to the bigger picture — a global digital decentralised currency.
However, it’s impossible to make sense of that logic when traditional currencies are far from being antiquated and central governments are keen on adopting Central Bank Digital Currencies (CBDC).