The idea that a digital currency is less sustainable than all the plastic cards, metal coins and pieces of paper with people's faces on that we currently use to buy things seems a little ridiculous. But is it?
One of the biggest costs for any business, which relies on large servers or mass-computing power is computer cooling, and these systems use a heck of a lot of energy. So can Bitcoin ever reduce its clumsy carbon footprint?
Whats the Problem?
The problem at hand for Bitcoin lies with one of its unique selling points – the peer to peer network– which makes use of thousands of computers across the globe to secure Bitcoin from attacks by cyber criminals and other masked evil-doers.
It does this by raising the difficulty of the hashing algorithms which must be solved in order to accrue Bitcoins. This in turn raises the price of the computer power needed to gain control of all transactions on the network (51% of all transactions), thus ensuring continued security at the cost of energy.
The computers that make up the Bitcoin economy’s backbone continually ensure security and verifiability for the network by solving cryptographic puzzles. This process is called mining. Those who participate in this network maintenance are rewarded in Bitcoin, incentivizing them to bulk up their machines so they can mine more efficiently.
Bitcoin's Carbon Footprint
The downside is that all the computing power comes at a cost to the environment; all the heat thrown out by these mass-computing networks requires an advanced (and energy hungry) cooling system, which works out to 1.57 households daily usage of electricity per Bitcoin transaction.
Christopher Malmo, writing for Vice, suggests that “each VISA transaction consumes around 0.0003 household’s daily electricity use. That makes Bitcoin about 5,033 times more energy intensive, per transaction, than VISA, at current usage levels.”
The Other Side of the Bitcoin
Bitcoin supporters do not, however, agree with this analysis. The equation which cites VISA's enormous energy-supremacy over Bitcoin does not include the energy costs of running store fronts, employees driving cars to call centres which use a huge amount of energy in themselves.
There are also hundreds of different systems, unique to different companies and tributaries of those companies with hundreds more emplyed people working on different codes which largely perform the same function.
VISA must also make use of lawyers, lobbyists and real estate agents. The calculations also do not account for the enormous paper trail created through multinational organisations. Proponents of Bitcoin cite the enormous energy displacement of physical premises including lighting, heating, insurance, training courses and supplies, right the way down to the cost of desks and chairs.
Can Bitcoin Ever Challenge Fiat Currencies?
These considerations, Bitcoin supporters argue, are impossible to take in to account when assessing the efficiency of one system over another. With the Greek economy on decidedly shaky ground and more banking scandals emerging every month, Bitcoin's decentralised network is an ideal means of tackling in-house corruption.
What remains to be seen is whether Bitcoin can become a more scalable cryptocurrency in the future, with less demand on energy consumption to run the system. If this option is made viable then there is hope yet for the world's leading digital currency.