According to researchers at Cambridge University, in terms of annual energy consumption, Bitcoin now consumes more power than Argentina, the Netherlands, and the United Arab Emirates, at 121.36 TWh.
The Cambridge Bitcoin Electricity Consumption Index, a tool developed by the Cambridge Centre for Alternative Finance under the University of Cambridge’s Judge Business School, provides a real-time update on Bitcoin’s network power. Their annualized chart shows a sudden rise from an estimated annual consumption of 56.48 TWh in late October to almost double that at 112.23 TWH in mid-January.
This surge in electricity consumption aligns with the meteoric rise of Bitcoin’s price, which has increased from $13,748 on November 1 to $46,517.40 on February 9. While much focus has been given to its price, experts are reportedly becoming increasingly alarmed by the “sheer level of energy required by so-called miners, which release new coins into circulation.”
According to Digiconomist’s Bitcoin Energy Consumption Index, a tool created by data scientist Alex de Vries, Bitcoin now has a “carbon footprint comparable to that of New Zealand,” producing an estimated 36.95 megatons of C02 per year.
Michel Rauchs, a Cambridge researcher, told CNBC that Bitcoin’s energy needs are “enormously large,” and that Bitcoin accounts “for around 0.5% of total global electricity consumption.”
The reason for Bitcoin’s growing consumption of energy is its reliance on a process called “mining,” where “purpose-built computers” compete to solve complex hashing algorithms on which the cryptocurrency’s blockchain — “a digital ledger of all bitcoin transactions” — relies.
After Tesla, Inc. announced that they had purchased approximately $1.5 billion Bitcoin and were planning to accept it as payment in the future, Bitcoin’s value hit a record high of $48,000 this week, further fueling the “incentive to Bitcoin miners to run more and more machines.”
Critics have pointed out that Tesla’s investment “clashes with the electric car firm’s previous environmental stance” when considering Bitcoin’s energy implications.
“Elon Musk has thrown away a lot of Tesla’s good work promoting energy transition,” David Gerard, author of Attack of the 50 Foot Blockchain said, reported by the BBC. “This is very bad… I don’t know how he can walk this back effectively. Tesla got $1.5 billion in environmental subsidies in 2020, funded by the taxpayer. It turned around and spent $1.5 billion on Bitcoin, which is mostly mined with electricity from coal. Their subsidy needs to be examined.”
Gerard then proceeded to suggest that a “carbon tax on cryptocurrencies could be introduced to balance out some of the negative consumption.”
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