Last year’s bitcoin frenzy appears to have run its course. The cryptocurrency’s near-vertical ascent to more than $19,000 was followed by an equally precipitous decline as speculators fled the market as fast as they had joined, leaving ownership to those in it for the long haul and still confident in its inherent value. The result is that bitcoin has now found a modicum of peace. To be sure, the currency has continued on its downward trajectory – in mid-July it sat around $7,500 – but the fall has been gentler and some positive noises are again being made on its longer-term potential.
However, for the millennial investor in particular, there has emerged a new and little foreseen problem – bitcoin’s increasingly enormous environmental impact – which threatens to derail the entire project if allowed to deteriorate further.
“The bitcoin phenomenon has ignited a controversial debate amongst many stakeholders on whether cryptocurrencies is just another bubble in the making, or just another fad, or actually an innovative technological advancement similar to that of the internet, that will disrupt the financial industry” said Mustafa Adil from Thomson Reuters, a strategic partner in the upcoming World Green Economy Summit taking place on 24 – 25 October 2018 in Dubai.
The problem lies in the way in which bitcoin operates. With no central authority or bank overseeing transactions, there needs to be a way to check that a bitcoin hasn’t been expended again before the transaction is cleared, that the sender actually owns the sent amount, and that input and output expenses match. This task is undertaken by ‘miners’, who compete against each other to be first to solve the complex mathematical problems required to authenticate a block of transactions, which are then permanently appended to the blockchain, and are rewarded for their efforts in new bitcoin.
Massive increase in mining power requirements
When bitcoin was first introduced in 2009, all that was needed to mine for cryptocurrencies was a simple home computer. But as more and more blocks of bitcoin were added, the mathematical difficulty increased, and the computing power required soared way beyond the means of the lone miner.
A major problem of this exponential growth is the sheer amount of electricity now used by competing cryptocurrency miners. If bitcoin were a country, it would be 41st in the world in terms of energy consumption, just behind Chile and Austria, and just ahead of Switzerland and the Czech Republic, according to the Bitcoin Energy Consumption Index. And added to this problem, the bitcoin network is mostly fuelled by coal-fired power plants in China, resulting in a truly massive carbon footprint
If bitcoin and other cryptocurrencies are to continue to be attractive, this will have to be remedied.
Enter the green cryptocurrency.
There are several ways in which the latest generation of cryptocurrencies are tackling the problem of unsustainable energy consumption.
Simpler algorithms, green energy sources
Bitcoin Green, Burst and EverGreen, for example, employ proof-of-work algorithms that require far less power consumption than Bitcoin. Others such as EnergyCoin also use a simpler algorithm and are specifically designed to support moves away from fossil fuels and towards local power generation and renewables. Another option is to only use green energy sources – such as the hydro dam near the Niagara Falls used by Ormeus Coin – to power a cryptocurrency’s mining operations.
All this remains new, however, and it is difficult to see yet which of the growing spate of green cryptocurrencies will most capture the investing public’s imagination in the way that bitcoin and, to a lesser extent, Ethereum and Ripple have. But the current levels of electricity generation required to mention bitcoin are clearly unsustainable and it is likely we are now on the cusp of a new cryptocurrency revolution: the green cryptocurrency.
In the meantime, the traditional – if it is not too soon to use that word – cryptocurrencies may yet survive if the solution being developed in Iceland by the Moonlite Project is successful. Moonlite will initially mine bitcoin, Bitcoin Cash and Litecoin using power derived solely from Iceland’s plentiful geothermal, hydro and wind sources. Other cryptocurrency and blockchain opportunities will be added later.
The World Green Economy Summit (WGES) brings together world-class experts in critical sectors from around the world to directly focus on advancing the global green economy and sustainability agenda, achieving the UN Sustainable Development Goals and implementing the recommendations of COP21 & 22. Organised by the Dubai Electricity & Water Authority and World Green Economy Organisation, the event is strategically supported by Thomson Reuters.
Any opinions expressed here are the author’s own.
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