Note4Students
From UPSC perspective, the following things are important :
Prelims level: Cryptocurrencies
Mains level: Carbon footprint of cryptocurrencies
Bitcoin prices are rising these days and so will be its mining. As cryptocurrency will become mainstream, its carbon footprint cannot be ignored.
What are Cryptocurrencies?
Global crypto market
- In 2019, the global cryptocurrency market was approximately $793 million.
- It’s now expected to reach nearly $5.2 billion by 2026, according to a report by the market research organization Facts and Factors.
- In just one year—between July 2020 and June 2021—the global adoption of cryptocurrency surged by more than 880 percent.
Carbon footprints of Bitcoins
- Increasing popularity of cryptocurrency has environmentalists on edge, as the digital “mining” of it creates a massive carbon footprint due to the staggering amount of energy it requires.
- A/c to the Bitcoin Energy Consumption Index, the carbon footprint of Bitcoin is equivalent to that of New Zealand.
- Both emit nearly 37 megatons of carbon dioxide into the atmosphere every year.
What is Mining?
- Mining is a process in which computational puzzles are solved in order to verify transactions between users, which are then added to the blockchain.
- In simpler terms, the works are created, or “minted,” through a process called proof-of-work (PoW), which establishes its unique identity.
How do cryptocurrencies create such a footprint?
- Unlike mainstream traditional currencies, bitcoin is virtual and not made from paper or plastic, or even metal.
- Bitcoin is virtual but power-hungry as it is created using high-powered computers around the globe.
- Bitcoin is created when high-powered computers compete against other machines to solve complex mathematical puzzles.
- This is an energy-intensive process that often relies on fossil fuels, particularly coal, the dirtiest of them all.
Conclusion
- What this means is that, unlike traditional currency or gold, Bitcoin is not solely a settlement layer, not solely a store of value, and not solely a medium of exchange.
- This makes Bitcoin’s relative energy consumption productive in comparison to comparative sectors, given its robust potential uses.
- The promise of such an endeavor offers hope for a more sustainable cryptocurrency future.
- Whether this will make much difference to the climate crisis in light of government and industrial inaction remains to be seen.
Back2Basics: Bitcoin Energy Consumption Index
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