Bitcoin's ability to reduce fraud and security risk has made it one of the most transparent digital currencies on the market. Many see this as a critical next step to holding governments accountable for carbon emissions, and even developing a market for reducing the world's carbon footprint.
But the currency also has a dark side. A new study from the University of Hawaii finds that if bitcoin becomes more widely adopted, the huge amounts of electricity used to trade the cryptocurrency could help push global temperatures above 2 degrees Celsius by 2033.
According to the Intergovernmental Panel on Climate Change (IPCC), a 2-degree rise in global temperatures could reduce water availability in some areas by up to 30%, make arctic species like the polar bear vulnerable to extinction, and subject another 10 million people to coastal flooding.
While bitcoin isn't responsible for as many emissions as pollution-heavy industries, such as agriculture and transportation, the industry is releasing carbon dioxide at an alarming rate.
While the researchers acknowledge that they can't predict the future of bitcoin, which has a short history characterised by cycles of boom and bust, they've developed a relatively conservative model: If bitcoin is adopted at a rate even close to the slowest pace of major technologies like cars, credit cards, or air conditioning, it could soon alter the environment as we know it, said Camilo Mora, the study's lead author.
If bitcoin continues to thrive, it could make the world even more vulnerable to climate-related disasters like droughts, tropical storms, and rising sea levels. Already, the IPCC predicts that the world is on track to see a 1.5-degree temperature rise by 2040. But bitcoin transactions could push these temperatures above the 2-degree threshold even sooner than expected.
In short, the industry could double the magnitude of current climate-related disasters, said Mora.
If the link between bitcoin and climate disaster sounds tenuous, consider how the currency is traded: In order to transfer a payment or carry out a sale or purchase, bitcoin uses a digital record-keeper called blockchain, whose records are verified by miners - a costly process that requires a lot of computer power.
For their study, the researchers looked at the efficiency of computers used for bitcoin mining, where bitcoin mining occurs around the world, and the CO2 emissions of electricity production in those countries.
A recent report found that the electricity used for a single bitcoin trade could power a home for almost a month. In 2017 alone, the use of bitcoin produced 69 million metric tons of carbon dioxide - about the same as the American state of Arkansas.
One possible way to reduce emissions is to slow down the process by accumulating more transactions per block (the file where data is recorded). But this would reduce the very speed and efficiency that has made bitcoin so successful.
Perhaps the more viable solution is for bitcoin to recognise the financial benefits of becoming more energy efficient. But even then, the industry will have to act quickly.
"Right now, there is no reason to be concerned," said Mora, "[but if bitcoin] continues to grow, it could get out of control pretty fast."
Also from Business Insider South Africa