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Bitcoin and cryptocurrencies towards sustainability: what is being done to reduce the environmental impact
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Bitcoin and cryptocurrencies towards sustainability: what is being done to reduce the environmental impact

From fossil fuels to renewable energy through changes to the blockchain and green cryptocurrencies

For more than a decade now we have been hearing more and more often about cryptocurrencies (today there are more than 17,500 types) and precisely since 2008, the year in which Bitcoin was "coined". Over time, their value has increased to a record $63,000.

The media spotlight of Bitcoin, which made it known to the general public, took place in February 2021 when Elon Musk (founder of Tesla and now also owner of Twitter) announced that he had invested one and a half billion dollars in Bitcoin and that Tesla would have accepted payments in this virtual currency.

Following these announcements, the value of Bitcoin skyrocketed to then collapse only three months later, when Tesla announced that it no longer accepted payments in Bitcoin as cryptocurrency transactions increased the use of fossil fuels, especially coal whose emissions into the atmosphere are known to be of the worst kind.

What is Bitcoin

Bitcoin is the most famous of the cryptocurrencies and is considered the digital equivalent of gold. It is a virtual currency conceived as a means of transferring wealth without the involvement of any Central Bank which therefore has the power to devalue it.

Bitcoins are stored in digital wallets called "wallets" which are basically platforms that can be accessed via a website or via an app to download on your smartphone.

On these platforms it is possible to buy Bitcoin or other cryptocurrencies starting from real money in euros, dollars or other traditional currencies (called "fiat") in a process called "exchange".

Bitcoin transactions are stored in a decentralized digital register (shared among all users) in which the data is encrypted reaching extremely high levels of security.

This register is known as the "blockchain", a digital database structured as a chain of interconnected blocks that allows currency exchange operations.

Bitcoin and the environmental impact

Bitcoin, like other cryptocurrencies, is immaterial, so in itself it has no production costs in traditional terms such as the use of paper and plastic for banknotes or the extraction of precious metals for coins.

However, Bitcoin requires a large amount of energy to "mine".

The process of extracting bitcoins, called "mining", consists in solving complex cryptographic equations to create new virtual currency in the form of new blocks to be added to the blockchain chain. Miners, for each verified transaction, earn a portion of Bitcoin.

Mining is therefore an extremely energy-intensive process since the processing of the computational calculation aimed at verifying and validating the transactions takes a long time and is carried out by super-powerful computers which, by consuming a lot of energy mainly deriving from fossil fuels, contribute to the emission of greenhouse gases .

The CCAF (Cambridge Center for Alternative Finance) has identified the "Cambridge Bitcoin Electricity Consumption Index", an index that measures the amount of electricity used in the world in the process of mining cryptocurrencies. It found that in one year the amount of electricity used in the mining process is equal to that consumed by medium-sized nations such as Italy and the Netherlands.

By comparing the data on the emissions produced with respect to their market value, it can be seen that in 2020 the extraction of a single Bitcoin (greater than 50% of its value) polluted more than the extraction of oil (41%) and the extraction of gold (4%).

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Bitcoin, cryptocurrencies and sustainability

The growing push towards sustainability is also overwhelming the world of cryptocurrencies, committing the various companies in the sector to reduce their carbon footprint by following different paths.

An example is the use of renewable energy sources, mainly hydroelectric which, in spite of wind and solar energy, not being intermittent, guarantees a constant electric flow (an indispensable condition for the mining process).

The Bitcoin Mining Council (BMC), the global forum of companies operating in the Bitcoin and mining industry, produced a report in July 2022 according to which in the second quarter of 2022, 59.5% of mining activity was done using a sustainable energy mix.

Another example of a transition to sustainability is that of Ethereum, the second cryptocurrency after Bitcoin in terms of importance and popularity.

Ethereum has recently decided to make a green change by changing its mining process for the validation of transactions (from Proof-of-work which is the Bitcoin model to Proof-of-stake based on user participation in the blockchain itself ) in order to consume less energy potentially reducing it by 99%.

Then there are sustainable cryptocurrencies created specifically in a green key.

BitGreen (BITG) is a cryptocurrency founded in 2017 with the aim of encouraging virtuous green behavior on the part of consumers to earn BITG, such as, for example, the purchase of zero kilometer products or shared car use (carpooling).

Powerledger (POWR) is a cryptocurrency that was born in 2016, a platform to allow peer-to-peer exchange of energy generated through solar panels.

Cardano (ADA) developed by the co-founder of Ethereum, is a sustainable currency that manages to combine speed and efficiency allowing 1000 transactions per second with less energy consumption than the 7 of Bitcoin. Furthermore, Cardano is used for digital contracts and decentralized applications.

Chia (XCH) is an innovative cryptocurrency that is based on the "Proof of space" method. This method allows you to independently extract Chia using the available space of your PC's Hard Disk by aggregating it, thus, to the decentralized network.

Crypto Climate Accord (CCA)

Among the initiatives that aim at the sustainability of the crypto world is the Crypto Climate Accord (CCA), an agreement aimed at eliminating the climate impact deriving from cryptocurrencies.

Inspired by the Paris Climate Agreement, the CCA focuses on decarbonising the blockchain industry and cryptocurrency mining processes.

The agreement is made up of a group of private companies that undertake to totally replace non-renewable energy sources by 2025 with renewable ones, reaching net zero emissions in 2040.

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