You can no longer ignore cryptocurrencies in the financial market. The great leader in the market is, of course, Bitcoin, but there are doubts about whether paying with this digital currency is really that sustainable in the end. Energy consumption and CO2 emissions are questioned, but how polluting is digital currency really?
Bill Gates previously expressed concern about Bitcoin’s impact on the climate. Other parties, in turn, indicated that Bitcoin is not as polluting as previously thought. How polluting is Bitcoin really? And more importantly, how is this different from our current payment system?
CO2 emissions per transaction
After a few clicks on the Internet, you will come across several studies. According to Digiconomist, a Bitcoin transaction uses around 930 kWh of electricity. According to Rabobank, this would equate to approximately 330 CO2e per transaction in the Netherlands. If the power comes from Chinese coal-fired power plants, the CO2 equivalents will rise to 450. But is this really that much?
In 2018, the Dutch Central Bank conducted research on CO2 emissions from euro payments. This study shows that the emissions of a cash payment amount to 4.6 grams of CO2. A debit card payment is good for 3.8 grams of CO2. These 3.8 grams were later adjusted by the Dutch central bank to 0.9 grams of CO2 per payment. This would mean that a Bitcoin transaction processed in China emits five hundred times more CO2 than a debit card transaction in the Netherlands.
Visa transaction vs. bitcoin transaction
Rabobank also agrees with Bitcoin’s high emissions compared to a euro transaction: “A Bitcoin transaction costs an incredible amount of energy, a regular cashless payment costs a fraction of this. Twenty bench presses for one mouse click.”
“A recent publication by PWC estimates that a transaction on the Bitcoin network consumes 750 kilowatts of power. 450,000 Visa transactions can be made for the same amount of energy. It can be compared to the electricity consumption of a Dutch family in about 75 days,” says Rabobank.
Jerrymie Marcus of BTC Direct points out that Rabobank cannot compare the studies in this way. “PWC research compares Bitcoin to Visa. But that’s not fair. Bitcoin is a complete monetary network; this includes monetary policy, confirmation of current transactions, a record of all past transactions (blockchain), and the security of the entire payment network. Visa, on the other hand, is just one link in the entire chain of transactions. Visa relies on central and commercial banks, various government agencies, and payment networks such as ACH, Fedwire, and Swift. None of this is taken into account if only the energy consumption per transaction is considered.”
-Forbes (@Forbes) March 29, 2021
“The contradiction that PWC raises between Visa and Bitcoin is not supported by Visa. On the contrary, the credit card company is embracing Bitcoin,” said Jerrymie, referring to the Forbes tweet.
Although the figures are difficult to compare, it is safe to say that the carbon footprint of a Bitcoin transaction is hundreds of times greater than that of a debit card payment, according to De Nederlandsche Bank.
Daan Kleiman of the Bitcoin platform Bitonic strongly disagrees. “A transaction cannot be recalculated to energy, because a transaction is not independent. Bitcoin transactions cannot be separated from a Bitcoin block. A block contains a collection of transactions that are connected in all sorts of ways with other constructs.”
“So it is not possible to calculate per transaction, you can only compare the entire system. For example, when making a comparison, look at how much CO2 is released during banking system security, for example, monitoring gold storage at De Nederlandsche Bank. The good thing about Bitcoin is that you only need internet and power,” says Daan.
Easiest Bitcoin System to Green
“In the event of excess capacity at a coal-fired power plant or wind farm, (more) computers can be used. This allows energy that would otherwise be wasted to be used for mining.” Also, Bitcoin is easier to green than the current system. Because only electricity is required, only the generation of this needs to be done in an environmentally conscious manner. Greening the entire euro system is much more difficult. “If you want to be very bland, you even have to look at what people who work in banks emit. These are not necessary with Bitcoin,” says Kleiman.
“At first it was only for criminals and now Bitcoin is destroying the world. Bankers believe they have the best system, it can be difficult for them to understand that there is an alternative (better). It’s kind of a competition,” he says.
Investing in Bitcoin: 5 Questions for Trader and Analyst Madelon Vos
However, banks are still supreme in the financial world right now. “Mortgage applications, for example, are not yet possible via Bitcoin,” says Kleinman, who hopes we will see this in the future. Read what Twitter founder Jack Dorsey thinks about this in this article.
Have you seen a bug? Send us an email. We are grateful to you.