Mining Harm to the Environment. How serious is it?
Mining harm to the environment. How serious is it?
The statements about the mining harm by Elon Musk and other market participants became one of the reasons for the market correction. How fair are these arguments?
Elon Musk announced that Tesla will no longer accept Bitcoin as a means of payment in mid-May. The reason is the increasing pollution of the environment due to bitcoin mining. Musk raised the problem – the non-environmental friendliness of cryptocurrency mining.
Research on the mining harm
Researchers at the University of Cambridge have concluded that bitcoin uses more electricity annually than all of Argentina: about 121.36 terawatt-hours of electricity per year. Experts believe that this number is unlikely to decrease in the near future.
The Greenpeace organization was also interested in the problem of environmental pollution due to mining. Opinions about the dangers of mining for the environment have been expressed more than once. In April, Nature Communication magazine predicted that by 2024 the greenhouse effect from mining farms in China will exceed the Philippines’ greenhouse effect.
In addition to Greenpeace, the problem of the harm of mining to the environment was also highlighted in China. A news agency close to the country’s authorities announced a possible ban on mining in the country, stating, among other things, that mining “consumes a lot of energy”, so the cryptocurrency does not meet the goal of “carbon neutrality.”
The impact of restrictions on the sustainability of mining
Together with the recent ban on mining in Iran, restrictions in China could improve the environmental friendliness of mining and increase the use of renewable energy sources in it, said expert Daniel Frumkin from Prague. He calculated how much energy is spent on mining.
For example, waste gas in the United States alone is probably enough to keep the Bitcoin network running. According to Frumkin, the very reasoning about the benefits or harms of this or that type of energy consumption is illogical without reference to the context and specific conditions.
The production of solar panels, which are actively supported by the advocates of renewable energy, does some harm to the environment. Large production of these panels is located in Xinjiang province, where a large number of mining farms are also located, which are accused of environmental pollution.
In early June, the authorities of the Xinjiang Uygur Autonomous Region ordered the immediate termination of miners’ activities. A similar decision was made by other regions in China.
However, even if the price of BTC remains constant for two years, using electricity from solar panels, the difficulty of mining will continue to increase until the average cost of mining for miners equals the actual price of BTC. At the same time, mining will remain profitable for miners, albeit at a constantly decreasing rate, throughout the entire 48-month period. In addition, the initial investment actually pays off towards the end of the 3rd year of operation. Thus, the use of solar energy for mining will only be rational if investors believe that the price of BTC will increase significantly over the next 4 years.
Renewable energy sources
Much of the energy used for mining comes from renewable sources. So in 2019, according to some estimates, about 73% of the energy used for mining was carbon neutral. According to the University of Cambridge, this number is almost 2 times less and only 39% met the carbon neutrality criterion in September 2020.
According to Daniel Frumkin, a significant part of mining farms use the energy of hydroelectric power plants and natural gas. In recent years, the levelized cost of renewable energy has dropped significantly and is almost equal to that of coal-fired power plants. All this suggests that the environmental harm factor of bitcoin can be exaggerated.
The topic “mining harm to the environment” in the crypto industry becomes a powerful argument when switching from one blockchain to another.
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