Cryptocurrency Becomes a New Environmental Pollution Headache [Im Ju-hyung's Tech Talk]

CEO Musk: "Cryptocurrency Promising but Environmental Concerns"
Massive Power Use in 'Mining' Process
Rising Worries Over Fossil Fuel Power Surge
Recent Formation of 'Mining Council' Using Renewable Energy
Development of 'Eco-friendly Coins' Reducing Power Consumption Achieved

A thermal power plant located in Hebei Province, China. China is a country where about 65% of cryptocurrency mining takes place. / Photo by Yonhap News

[Asia Economy Reporter Lim Juhyung] One of the reasons for the recent sharp decline in cryptocurrency prices such as Bitcoin and Ethereum is the 'environmental pollution risk.' As issues caused by climate change and environmental pollution become more serious, concerns are growing that cryptocurrency mining and transactions further exacerbate pollutant emissions. This is why there are calls for cryptocurrencies to provide clear solutions to environmental problems if they are to establish themselves as a new store of value in the future.

Elon Musk, Tesla CEO, who once called himself the "Dogefather" (the father of Dogecoin) and took on the role of a 'cryptocurrency evangelist,' made a sudden bombshell announcement on the 12th (local time), stating that Tesla would no longer accept Bitcoin as a payment method for its vehicles.

The reason Musk, who had previously made positive remarks about cryptocurrencies, abruptly changed his stance was due to environmental pollution concerns. In a post on his Twitter account at the time, he said, "There is no doubt about the promising future of cryptocurrencies," but emphasized, "However, we cannot pay the price with the environment."

According to Musk, the mining of Bitcoin has seen a sharp increase in the use of fossil fuels, especially coal. As a solution, Musk said, "I am looking for other cryptocurrencies that consume less than 1% of the energy used to mine Bitcoin."

Following Musk's remarks, all cryptocurrency prices fluctuated significantly. In particular, Bitcoin plunged nearly 20% compared to the previous day (the 11th).

Elon Musk, CEO of Tesla, recently announced that Tesla vehicles will no longer accept Bitcoin as payment / Photo by Yonhap News

Since then, negative factors such as China's economic authorities announcing regulatory policies on cryptocurrency mining have overlapped, and cryptocurrencies have been unable to recover their peak prices.

So, what actual impact do cryptocurrencies like Bitcoin have on the global environment? Trading cryptocurrencies does not directly emit pollutants. However, if the amount of electricity consumed for mining increases sharply, power plants will need to be expanded to supply this electricity, which raises concerns about worsening environmental pollution in the process.

Mining refers to the process of using the computing power of computer chips to maintain the 'blockchain network' of cryptocurrencies and thereby accumulate new cryptocurrencies. Currently, professional Bitcoin miners or mining agencies use massive computers made by arranging thousands of graphics processing units (GPUs), which consume enormous amounts of energy when operating.

A cryptocurrency mining farm. It operates by connecting so-called 'cryptocurrency miners' made up of Graphics Processing Units (GPUs). / Photo by Yonhap News

As the cryptocurrency boom continues, electricity consumption has recently increased significantly. According to the 'Cambridge Bitcoin Electricity Consumption Index' compiled by researchers at the University of Cambridge in the UK, the electricity consumption for cryptocurrency mining, which was about 6.6 terawatt-hours (TWh) in 2017, surged more than tenfold to 67 TWh as of October last year. Furthermore, as of February 22 this year, it exceeded 129 TWh annually, nearly doubling again.

The electricity consumption of 129 TWh is comparable to the annual electricity consumption of Argentina, which had a population of about 45 million in 2020. In just four years, Bitcoin's electricity consumption has skyrocketed to a level comparable to that of a country.

It is also problematic that a significant portion of cryptocurrency mining is conducted in developing countries such as China. While electricity prices are generally low in developing countries, the proportion of power generation relying on fossil fuel power plants is high.

According to the 'Bitcoin Electricity Consumption Index,' currently, 65% of cryptocurrency mining takes place in China. According to 'Ember,' an energy and climate think tank, China accounted for 53% of global coal power generation last year.

On the morning of the 23rd, the Bitcoin price was displayed on a monitor at the Bithumb Gangnam Customer Center in Seoul. At around 7:54 a.m. that day, the Bitcoin price at this exchange dropped to 57.9 million won. / Photo by Yonhap News

As a result, the cryptocurrency industry is making every effort to shed the stigma of being 'Dirty Coin.'

For example, cryptocurrency miners plan to increase the use of renewable energy in the future.

On the 24th, Michael Saylor, CEO of the US software company MicroStrategy, announced the formation of the 'Bitcoin Mining Council,' an organization promoting cryptocurrency mining based on sustainable energy.

The council also hosted meetings with Musk. After the meeting, Musk tweeted, "Talked with North American Bitcoin miners. Potentially promising," expressing a positive evaluation.

So-called 'eco-friendly coins' that minimize the amount of energy used for mining have also emerged. 'Chia' and 'Cardano' are representative examples. These cryptocurrencies use different mining methods from Bitcoin, striving to reduce power consumption.