Bitcoin could spark an energy crisis according to one tech expert, while others argue it’s a big opportunity for green power.
And it’s more than likely investors – who’ve seen gains of more than 80 per cent this year alone – will keep betting on the volatile cryptocurrency either way.
“If the governments are not putting regulations in place, it is likely we will see energy shortages due to Bitcoin in coming years,” Dr Mohiuddin Ahmed from Edith Cowan University told AAP.
That’s because Bitcoin needs power-hungry computers to solve cryptographic puzzles in order to verify each transaction, and as the price of the currency increases, more computers are racing to solve these equations.
It’s called Bitcoin mining and it’s resulted in a global boom in server farms built to power crypto transactions.
The majority of Bitcoin mining takes place in China, as well as Russia, Iran and the US.
Bitcoin mining operations worldwide now use an estimated 120 TWh of electricity per year, enough to power countries like Malaysia or Sweden, according to the Cambridge Centre for Alternative Finance.
It’s estimated most of it is derived from fossil fuels.
Dr Ahmed says Bitcoin miners don’t have to contend with any regulation of greenhouse gas emissions.
“No-one is going to ask you about your energy use,” he says.
“This type of ill-thinking is driving the energy crisis.”
While Bitcoin started out trading in 2009 worth almost nothing, by April 2021 one unit was worth more than $80,000.
With more Bitcoin miners competing as the price increases, there are worries the demand for power will be so vast the industry could hamper the clean energy transition of entire countries.
In one US town, Dresden in upstate New York, an 80-year-old power station has recently been re-tooled and fired up with gas, to power to a block chain mining facility.
But Melbourne cryptocurrency trading platform BTC Markets chief executive Caroline Bowler told AAP investors are “unperturbed” by questions about the industry’s carbon emissions.
She also cautions there’s not enough solid data on the issue.
“That’s not to say there’s a clean pair of hands behind it … but there’s a lot of confusion and argument,” she says.
While the CEO drives a hybrid car, she believes it unfair for the industry to be held entirely responsible for its carbon footprint and says energy generators need to lift their game.
In April, the global Crypto Climate Accord was launched, aiming to decarbonise the entire industry.
Dr Ahmed says less energy-intensive cryptocurrencies have been developed recently, including one called “Chia” – although there are reports its initial popularity created a shortage of hard drives in Vietnam.
Perhaps a solution lies in start-ups such as Sydney-based Iris Energy, which bills itself as a sustainable Bitcoin miner and is on track to become one of the biggest Bitcoin miners in the world.
Ex-Macquarie bankers, brothers Daniel and Will Roberts, have raised more than $150 million in funding since starting out in 2018.
Executive chairman, Daniel, told AAP the company deploys renewables based in British Columbia to power its mining operations.
He’s bullish on Bitcoin as a secure long term store of value.
“I think people would love to find a better Bitcoin,” he says.
“But the reality is Bitcoin is still the clear dominant winner.”
The company is currently operating a nine MW mining operation, with plans to expand to 20 times its current size in 2022.
But with Bitcoin a volatile market, Mr Roberts says there are other applications for his company’s data centre setup, such as powering high performance computing needs, including CGI, virtual reality and data analytics.
He believes Bitcoin’s big energy needs are fundamental to its security and underlying value.
“What gives Bitcoin its valuable characteristics is its energy consumption,” he said.
“But it will never use more energy than the market thinks it should.”