Is mining Bitcoin good or bad for the environment? Pt 2
Part 2
Don't miss a beat; read part 1 here!
And it seems that the drama around Musk was not enough for Bitcoin, but it was they who again drew the attention of Chinese regulators to cryptocurrencies. China has never been a big fan of this financial asset and has been looking for ways to limit it for years. And recent events have given them another reason to do just that.
"Recently, the prices of cryptocurrencies have jumped and collapsed, and speculative trading in them has returned and seriously jeopardizes the security of people's assets and disrupts the normal economic process and financial order," three leading Chinese regulators said in a joint statement . As a result, they banned financial institutions and payment companies from offering any cryptocurrency and transaction services. The country has already banned cryptocurrencies and ICO procedures.
China maintains its position that cryptocurrency trading is risky and believes that these assets are not backed by real value. The country believes that they are easy to manipulate and these transactions are not protected by its laws. The new bans do not allow companies to offer cryptocurrency services such as trading, processing, verification, etc. As might be expected, this immediately "pushed" Bitcoin prices down. Especially considering that Chinese citizens themselves are among the biggest fans, consumers and "miners" of cryptocurrencies.
Problems for Iran as well
In the last week of May, Iran announced a ban on cryptocurrency mining. The ban will be in effect until September 22, 2021. The reason is not because of the financial aspect of Bitcoin, but because of energy. It turns out that there are a huge number of illegal crypto miners in the country and they are among the main reasons for overloading its energy system. The problem has been going on for months and has led to frequent power outages, including in the capital Tehran.
During this time, regulators also began searching for illegal cryptocurrencies in the country. In January 2021, police confiscated nearly 50,000 machines that use a total of 95 megawatts per hour and pay the lowest, subsidized prices instead of the regular ones. The government estimates that 85% of all Bitcoin generation in the country comes from illegal farms. There are only 50 licensed crypto farms in Iran and they use 209 megawatts.
That doesn't sound like much, but when we consider illegal farms, the picture changes. Analyst firm Elliptic estimates that between January and April 2021, about 4.5% of the world's Bitcoin generation comes from Iran. China, yes, China is still the leader with nearly 70%. Despite the bans on the services themselves, China has not yet banned the very digging of cryptocurrencies.
What next?
Also in late May, Elon Musk announced that he had held "potentially promising" talks with leading Bitcoin "miners." It was then announced that a Bitcoin Digging Council would be set up to improve the resilience of the cryptocurrency. This board will develop and publish current and future ideas and ways to use renewable energy to reduce Bitcoin emissions.
No ideas published yet. It seems that the main goal of the Council will be to lead by personal example and to promote the use of "green" energy for digging Bitcoin. The Council will not have a regulatory role. His ideas will be just recommendations and examples to show the benefits of using sustainable energy to dig for cryptocurrencies.
Given that most of the generation of cryptocurrencies takes place in countries where green energy is scarce and expensive, the Council's ideas are unlikely to lead to major changes. Unless the Bitcoin industry and community itself begins to somehow promote the use of sustainable energy, for example by giving greater rewards for such activity. However, this seems very unlikely in the current state of the industry.
Digging for Bitcoin is really harmful to the environment. This can change, but it will take a lot of effort. You can start with simple steps in this direction, such as using "diggers" or leased servers that are in data centers that run entirely on "green" energy. However, sustained efforts will be needed to ensure that cryptocurrencies have a good impact not only on the portfolio but also on the environment.
By Martin Deshev.
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