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3 bitcoin-mining experts explain why concerns around the cryptocurrency’s massive energy consumption are overblown
Bitcoin mining uses vast amounts of electricity Olga Maltseva/Getty Images
Bitcoin’s recent rally has reignited fears that mining the coin is harmful to the environment, because of the among of energy required.
But cryptocurrency experts argue that concerns about bitcoin’s energy consumption have been taken out of context.
Miners say they’re increasingly moving towards using renewable energy, but data supporting the extent of that is unclear.
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Bitcoin’s 890% rally over the last year has reignited fears that mining the cryptocurrency is consuming a large amount of energy and harming the environment.
Mining is the process by which transactions on bitcoin’s public accounting ledger, called the blockchain, are verified without relying on a central authority. In order to verify new transactions, mining computers must race to solve an extremely complex problem, and those computations require a tremendous amount of energy. Once a bitcoin miner solves the problem, they’re rewarded with a transaction fee and newly minted bitcoins.
Exactly how much energy the bitcoin network consumes depends on who you ask. Estimates from the University of Cambridge say the total yearly electricity consumption of the Bitcoin network is 127.70 terawatt-hours, while Digiconomist estimates the network’s electrical energy to be 79.63, which the site says is comparable to the power consumption of Chile.
A technology that consumes the same amount of energy as an entire country sounds alarming, but Dan Held - head of growth at cryptocurrency exchange Kraken - argues the bitcoin network has been unfairly targeted by people who police bitcoin’s taking its energy consumption out of context.
“What it really comes down to when people don’t like bitcoin’s energy consumption is…they simply don’t like Bitcoin,” said Held. “And so people that are against crypto think that any energy consumption from Bitcoin is wasteful.”
Held stressed that everything in the world requires energy, and as technology advances, the amount of energy needed to power that technology will inevitably increase. He also estimates that the existing banking system uses over 650 terawatt-hours of energy per year.
But calculating the energy consumption of both the bitcoin network and the existing financial system is difficult, as it’s hard to account for every factor that supports each network. If one considers the air conditioning in a bank branch to contribute to the financial system’s total energy use, one could also argue the electricity used to power a bitcoin trader’s cell phone should be accounted for when calculating bitcoin’s energy use.
Further, since bitcoin miners are financially incentivized to operate on the cheapest electricity possible, that sometimes means they use energy that otherwise would have gone to waste, according to Mason Jappa, CEO of Blockware Solutions, an operator of some of the largest mining rigs in the US.
Jappa told Insider that some US rigs are powered by by a process called “gas-flare recapturing.” When natural gas is mined, a portion of the gas is flared into the air. Bitcoin miners capture the flare and use it for energy, preventing it from being released into the open air.
But the need for cheap energy also means that a lot of the miners still rely on coal, which is the least expensive form of energy in many areas around the world, said Aroosh Thillainathan, CEO of Northern Data, a company that develops and operates infrastructure for bitcoin mining and other high performance computing needs.
There’s no clear data on exactly how much of the total bitcoin network is powered by renewable versus non-renewable energy, but Thillainathan estimates roughly 50% of mining is done in China, and a significant portion of mining there is powered by coal.
Thillainathan told Insider that as the bitcoin network grows and the profitability of the mining increases, more energy will be required. As an operator of mines himself, he said miners should have a responsibility to the environment. Northern Data’s high performing computing centers in Norway, Sweden, and Canada use only renewable energy.
He hopes that as mining grows more profitable as the bitcoin expands and the price rises, more miners will rethink their operations and move towards using more sustainable energy sources.
“I’m a big believer in the bitcoin itself,” he told Insider. “It’s a great way to store your wealth…but as an infrastructure provider, we have to move to be as environmentally friendly as possible.”
Thillainathan said that mining using “dirty energy” isn’t sustainable in the long-term, because he anticipates governments will one day crack down on the use of coal plants.
The Crypto Daily – Movers and Shakers – March 13th, 2021
Bitcoin, BTC to USD, fell by 1.00% on Friday. Partially reversing a 3.44% rally from Thursday, Bitcoin ended the day at $57,297.0.
It was a mixed start to the day. Bitcoin rose to an early morning intraday high $58,159.0 before hitting reverse.
Falling short of the first major resistance level at $59,295, Bitcoin slid to an early afternoon intraday low $55,183.0.
Bitcoin fell through the first major support level at $55,430 before briefly revisiting $57,800 levels.
Falling short of $58,000 levels, Bitcoin fell back to end the day at sub-$57,300 levels.
The near-term bullish trend remained intact supported by the latest visit to $58,000 levels. For the bears, Bitcoin would need to slide through the 62% FIB of $24,751 to form a near-term bearish trend.
The Rest of the Pack
Across the rest of the majors, it was a mixed day on Friday.
Litecoin rallied by 9.61%, with Crypto.com Coin rising by 3.56% to buck the trend on the day.
It was a bearish day for the rest of the majors.
Binance Coin slid by 9.21% to lead the way down, with Cardano’s ADA (-8.10%) and Chainlink (-5.75%) weren’t far behind.
Bitcoin Cash SV (-1.30%), Ethereum (-3.22%), Polkadot (-1.54%), and Ripple’s XRP (-2.80%) also saw red.
In the current week, the crypto total market fell to a Monday low $1,508bn before rising to a Thursday high $1,769bn. At the time of writing, the total market cap stood at $1,727bn.
Bitcoin’s dominance fell to a Tuesday low 60.13% before rising to a Friday high 63.23%. At the time of writing, Bitcoin’s dominance stood at 62.35%.
This Morning
At the time of writing, Bitcoin was down by 1.36% to $56,517.0. A mixed start to the day saw Bitcoin rise to an early morning high $57,358.0 before falling to a low $56,504.0.
Bitcoin left the major support and resistance levels untested early on.
Elsewhere, it was a mixed start to the day.
Bitcoin Cash SV was up by 2.01% to buck the trend early on.
It was a bearish start for the rest of the majors, however.
At the time of writing, Crypto.com Coin was down by 3.84% to lead the way down.
Story continues
For the Bitcoin Day Ahead
Bitcoin would need to move back through the pivot level at $56,880 to bring the first major resistance level at $58,576 into play.
Support from the broader market would be needed for Bitcoin to break out from February’s swing hi $58,321.2.
Barring an extended crypto rally, the first major resistance level and resistance at $59,000 would likely cap any upside.
In the event of an extended crypto rally, Bitcoin could test resistance at $60,000. The second major resistance level sits at $59,856.
Failure to move back through the $56,880 pivot would bring the first major support level at $55,600 into play.
Barring an extended sell-off on the day, Bitcoin should steer clear sub-$54,000 levels. The second major support level sits at $53,904.
This article was originally posted on FX Empire
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