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Quick, before the bubble bursts—a carbon tax on cryptocurrencies?

by Greg Klein | November 30, 2017

Bitcoin’s wild ride has participants excited and skeptics sneering but conservationists might have cause for concern. The process of “mining” or creating the crypto-dough uses an awful lot of electricity—more than that used by each of 159 countries.

Quick, before the bubble bursts—a carbon tax on cryptocurrencies?

That’s according to Digiconomist, a website committed to “raising the overall quality of the cryptocurrency environment, which in turn may promote cryptocurrency acceptance.” For 12 months ending November 29, the site estimated Bitcoin’s annual electricity consumption at 30.29 terawatt hours.

Using data from the International Energy Agency, Digiconomist estimated that if Bitcoin were a country, it would rank 64th worldwide for electricity use, between Oman and Morocco, with 159 countries trailing. Most African nations, several more in Central and South America, a few more in Asia and even some smaller European countries use less electricity.

To compare with another payment system, Digiconomist said Bitcoin’s energy use by transaction comes out exponentially higher than Visa’s. Although the data was imperfect, the report acknowledged, “the differences are so extreme that they will remain shocking regardless.”

The problem results from increasingly powerful computer banks working flat-out on increasingly complex calculations. Referring to media reports from last August, Digiconomist noted that Bitmain’s Inner Mongolia operation was then credited with about 3.5% of the Bitcoin network’s processing power. (Bitmain has since expanded.) The operation consisted of seven buildings containing 21,000 Bitcoin mining machines, as well as one building holding 4,000 Litecoin machines.

Dirty energy doesn’t help. Pointing out that Bitmain’s electricity comes mostly from coal, Digiconomist found that “the energy efficiency of this Bitcoin mine is significantly worse than one might expect and that the carbon footprint of the mine is simply shocking.”

Digiconomist tackled the subject “to raise awareness on the unsustainability of the proof-of-work algorithm,” arguing that more energy-efficient crypto-creating algorithms can be developed.

As for Ethereum, energy consumption for 12 months ending November 29 came to 10.85 TWh, using about 58 KWh per transaction compared with 271 KWh for crypto #1.

Media reports often count the number of competing cryptos at more than 1,100.

Having soared over 1,000% this year to surpass $11,300 on November 29, Bitcoin’s price has been swinging wildly over the last two days, falling to $9,713 by November 30 press time. Ethereum also hit an all-time high on November 29 at nearly $520, but dropped to $435 by press time.

See Visual Capitalist’s Visualizing the journey to $10,000 Bitcoin.

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