I like Bitcoin. Bitcoin should be a small part of your Asset Allocation in an overall investment portfolio, to store value and being government and central bank independent.
But there is a big downside to Bitcoin. Bitcoin is bad for the environment, as it uses a lot of energy. Recent analysis from Cambridge University shows that it requires a staggering amount of electricity to mine Bitcoin. Bitcoin mining involves solving complex math problems in order to create new Bitcoin and update the blockchain, thereby ensuring the authenticity of transactions. Miners are rewarded in Bitcoin for their efforts. The more Bitcoin is mined, the more complex the algorithms that must be solved to get a Bitcoin become. This creates a need for an increasingly enormous amount of computer horsepower and electricity.
Mining Bitcoin already consumes more energy than 160 of them do separately. The same Cambridge study shows that currently, Bitcoin mining consumes more energy in a year than entire countries like Switzerland and Argentina. It is an escalating energy consumption concern. And the higher the price of Bitcoin goes, the more incentive there is for miners to try and earn some of it. That drives miners to string together more and more computing horsepower – and consume more and more electricity – as they run their high-powered computers day and night.
The bigger Bitcoin gets, the bigger its environmental footprint becomes, if there are no ways of saving energy. But currently, the source of the electricity behind much of Bitcoin mining makes the situation even worse. Almost 2/3 of Bitcoin mining happens in China, where the main source of electricity is coal, the dirtiest power source on the planet. Environmentalists are right to target Bitcoin as it is a huge waste of resources and a growing problem for the climate.
The Bitcoin mining society must find better, energy saving and sustainable solutions.
Sven Franssen