It’s hard to imagine a digital currency being bad for the environment but the process to mine a single bitcoin consumes a considerable amount of energy. A new paper, however, suggests there is a way to mitigate bitcoin’s energy problem through regulation.
Bitcoin mining is the process of adding bitcoin transactions to a public ledger, called the blockchain. To do this, miners use powerful computing chips and mining machines that help mining software unveil bitcoins.
“Each [mining machine] uses an enormous amount of power. They have to be switched on 24 hours a day and the designers haven’t taken into account the environmental impacts,” Jon Truby, director of the Centre for Law and Development at Qatar University and author of the paper told Newsweek. “As well as using a lot of energy, they’re also emitting heat and pollutants.”
In this new paper, Truby analyzed both legal and financial options that lawmakers could implement that would regulate blockchain and bitcoin energy consumption.
Published July 24 in Energy Research & Social Science, the study assessed how to incentivize people to develop and implement environmentally friendly bitcoin. The paper claims that if countries don’t lower the energy use from using bitcoin, then they might not reach their climate change goals and obligations, such as under the Paris Agreement.
Alex de Vries, author of this study on bitcoin energy consumption that came out in May, told Newsweek that bitcoin consumes 3.5 to 4 gigawatts of electricity per hour right now—Ireland as a country consumes 3.1 gigawatts per hour. Bitcoin could reach as high as 7.67 gigawatts per hour as soon as this year. As of July 31, a single bitcoin transaction could power nearly 31 U.S. households for a full day, according to the Bitcoin Energy Consumption Index on Digiconomist.
However, in an article published by Nature last year, environmentalist Guillaume Chapron argued that bitcoin and blockchain technology can help the environment by allowing bitcoins to be used a reward for countries reaching conservation targets. She wrote, “Healthy ecosystems could replace other forms of capital storage, such as cattle.”
Truby says bitcoin’s system is built similarly to physical mining for natural resources and as miners reach the ultimate resource limit of bitcoin, the costs and efforts will rise from the need to increase hardware resources. Truby said that by adding certain restrictions to encourage innovation, those environmental effects could be held back or avoided.
“Some people have whole farms, warehouses, mining factories of these devices and they’re using an incredible amount of power. Some of them have evolved and they’re looking for more sustainable power,” Truby said. While these sustainable options could be a good solution, Truby’s proposed regulatory options that could help as well.
He recommends collecting registration fees from digital coin buyers that would go to brokers. He also suggests a “Bitcoin Sin Tax” that would surcharge digital currency ownership as well as green taxes and restrictions on any mining machines that are purchased or imported.
Truby hopes these recommendations encourage a greener bitcoin mining process, while still allowing bitcoin to exist. He says, “I’m pro-technology, I’m pro-blockchain. I can really see the potential. I want us to develop sustainably and there are real risks now.”