ARE CRYPTO-CURRENCIES GREEN?
In the context of the 2008 subprime crisis, the advent of bitcoin has seduced its users. This crypto-currency, a forerunner in the digitalized financial environment, gives monetary power to its purchasers through its management by technology rather than by a centralized power. The crypto-currency is akin to a stateless international reserve currency, it is decentralized, untrusted and secure through blockchain technology.
The promise of bitcoin was to stand alongside national currencies and counterbalance the bank-financial monopoly of payments by creating an alternative to the loss of trust in financial institutions. Thus, bitcoin would have made money a free and common good, placing the user at the heart of the monetary system.
Unfortunately, the reality is somewhat different from this idyllic picture. In addition to the many existing risks such as money laundering, piracy or wash-trading, it would seem that crypto-currencies are very energy consuming. As announced by the American billionaire Elon Musk, boss of Tesla and SpaceX, he will no longer accept bitcoin for the payment of his Tesla vehicles, citing the excessive consumption of fossil energy needed to manufacture the crypto-currency. His announcement caused the bitcoin price to fall by 15% !
But what is it really?
Bitcoin is created on what is known as proof of work, an energy-intensive mining technology that allows miners to verify incoming data on the register, validate the authenticity of transactions or create new blocks.
However, looking at the energy issue, this can be seen as a design flaw in bitcoin. Another technique called proof of stake (POS) does not require as much energy as bitcoin while providing equivalent security. Other crypto-assets (e.g. Cardano's ADA, Binance coin, XRP, etc.) are based on POS-type protocols and may eventually supplant bitcoin.
According to a study by the Cambridge Bitcoin Electricity Consumption Index (CBECI), the transaction of one bitcoin has a carbon footprint equivalent to that of 735,121 Visa money transfers; or in terms of information flow, 55,280 hours of YouTube viewing. According to the CBECI, the annual consumption of the bitcoin network is reaching 128 TWh (terawatt-hours) per year, or 0.6% of the world's electricity consumption (equivalent to the consumption of countries such as Norway, New Zealand and Argentina)!