The price bitcoin skyrocketed to US$19,000 at one point in December as major U.S. exchanges get ready to trade this virtual currency for the first time. While the news media are generally amazed at this level of market frenzy, there are also worries about the volatility and sustainability of bitcoin. Regarding the latter aspect, the creation of bitcoins via “mining” by computers is recognized as being extremely energy intensive. According to an expert analysis, the amount of electricity needed to mine bitcoins in 2020 is projected to match the amount that is used by the entire world today. While this view assumes that the virtual currency will maintain its high-growth trajectory, such a scenario, if realized, would bring about an environmental crisis on a global scale. The growth of bitcoin mining operations in this case could be a factor that keeps the world dependent on fossil fuels.
As cited in a reporting from CNNMoney, Digiconomist, which is a website devoted to the study of virtual currencies, estimates that mining for bitcoins now requires about 31 terawatt-hours (TWh) of electricity per year. This amount is roughly equivalent to the total power consumed by three million U.S. households. By contrast, the credit card agency Visa Inc. processes billions of transactions every year using the amount of electricity that is comparable to the total power consumption of 50,000 U.S. households.
Meteorologist Eric Holthaus wrote on the environmental new website Grist that even as countries are accelerating efforts to phase out fossil fuels, bitcoin mining could hinder their progress significantly. Within the context of virtual currencies, mining is about generating new units of the currency by committing computing power to solve math problems of ever-increasing complexity. Holthaus expects that the amount of aggregated computing power to create new bitcoins will grow exponentially, straining the available electricity supply. His article on Grist warns that at the present growth rate, the electricity used by bitcoin mining operations in the mid-2019 will exceed the present level of power consumption of the entire U.S. Furthermore, the electricity used sustain this virtual currency by February 2020 will be equivalent to the total amount of power used by the entire world today.
According to Digiconomist, China has become a major bitcoin producer. Digiconomist’s study on the mining operations in Inner Mongolia finds that obtaining one new bitcoin there will use up the amount of energy needed to fly a Boeing 747 jet.
Chicago Board Options Exchange (CBOE) and Chicago Mercantile Exchange (CME) will soon begin trading futures for bitcoin. While the price of bitcoin has swung wildly, demand growth for this currency is expected to be strong. John Quiggin, an economics professor at the University Queensland, told CNNMoney that bitcoin may become “institutionalized” as it is traded on CME. Quiggin also warned policymakers to take immediate actions as to avert this potential “environmental disaster.”
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