What are cryptocurrencies and how much energy do they consume LifeGate

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It was 2008 when the mysterious Satoshi Nakamoto, a Japanese with an unknown identity, invented the first cryptocurrency to the world: bitcoin. An idea that, in the space of a few years, had a resounding and global success. Only ten years later did the digital currency market reach i 110 billion dollars: a value comparable to the gross domestic product of a nation such as Morocco.

The meaning of the word cryptocurrency

Today there are thousands of cryptocurrencies. What is the meaning of this word? Cryptocurrency is the Italian translation of the English term cryptocurrencyin turn deriving from cryptography (cryptography) e currency (currency).

List of the most popular cryptocurrencies in the world, from bitcoin to ethereum

In addition to bitcoin, the list of the most popular cryptocurrencies includes the ethereum, the tether, the binance coin or the dogecoin and it shiba inu. These are payment instruments based not on control by a state, that is, by one central bank which monitors fluctuations and physically prints the banknotes, but on cryptography. The latter, in fact, allows to a network of people to “join forces” to generate money and circulate it. But it is not able to curb unbridled speculations, which generate gigantic (and often sudden) ups and downs in the value of the same cryptocurrencies.

“When from the baker we pay with our card ATM 1 euro for a loaf – explains the newspaper specialized in ethical finance Valori.it – ​​we just send a message to our bank. By giving the order to transfer a certain amount from ours Bank account to that of the baker. On the register linked to our account, ‘-1 euro’ will be marked, while on that of the baker ‘+1 euro’. In this kind of transactions it is the banks that act as guarantor. As they check and update the database where the current account balances of all citizens are recorded “.

What is the blockchain and how it works

Bitcoin was invented to carry out this same type of transaction without needing thebrokerage of banks. The latter’s databases are replaced by a ledger: a record of all transactions, continuously updated by a network of tens of thousands of computers around the world. Problem: Banks do not just provide the service, they also supervise the purpose of avoid scams. Who takes care of it in the case of cryptocurrencies? To ensure the traceability and security of transactions, digital currencies rely on a technology called blockchain.

El Salvador Bitcoin criptovaluteA shop in El Salvador, the first country in the world to make bitcoin currency © Alex Peña / Getty Images)

The literal translation is “block chains “. It is, in fact, the ledger (register) shared by all those who contribute to generate cryptocurrencies (the so-called mining) and to manage their transactions. Immense computing capacity is required to ensure the functioning of blockchains. Hundreds of thousands of computers need to be networked for this. And for this the so-called bitcoin & co “factories” were born. Whose energy consumption has literally exploded over the past few years.

These are places, mainly warehouses or even hangars, in which thousands of servers they work together, stacked on top of each other, day and night, 24 hours a day, non-stop. The question will be asked: why this mining rush? Because cryptography is like an enigma to which, through calculations, the solution can be found. And whoever does it first gets one reward in the blockchain system (paid, of course, in cryptocurrency).

What is mining, the “creation” of cryptocurrencies

The French business newspaper Les Echos visited a bitcoin factory in China and explained the system in a particularly effective way: “I computer have the goal of solving cryptographic problems. It’s a bit like trying billions of combinations of a safe. The miner who succeeds in this in the shortest possible time unlocks the lock ”. To better understand the process one can imagine that a miner is a person playing dice in a casino. A dice with a thousand faces: you are not, a thousand. To win, he has to roll less than 10, so his chances of winning on the first try are very low. For this he rolls the dice as quickly as possible and, despite this, it will take him a lot of time to succeed in the enterprise.

But if many people roll the dice, many “miners”, the duration of a single game becomes shorter because it is statistically more likely to hit the goal of letting out a number less than 10. And when it happens all other players control that it is true: this is how the system guarantees its reliability even in the absence of a central controller. The winner takes the prize and another round, another game, can begin.

What does the climate impact have to do with cryptocurrencies?

So far the system does not create problems, quite the contrary. It is an innovation. The blockchain technology, applied to other sectors, can in fact guarantee “bottom-up” and “widespread” control. The problem, in the case of cryptocurrencies, is its extremely intensive use. One of the issues that create discussion is, in this sense, impact environmental: it has been calculated several times, and the data is impressive. In 2018, the Digiconomist portal, specialized in cryptocurrencies, explained that the energy that they normally consume was used only for the functioning of bitcoin 10 million European citizens in one year. More than that of the entire population of a country like Chile. But four years ago, cryptocurrencies were much less widespread than today. Not surprisingly, the Cambridge bitcoin electricity consumption index (Cbeci) estimated in 2021 that the annual consumption of bitcoin alone could be 128 terawatt hours. Let’s talk about the 0.6 percent of world electricity generation, equal to the absorption of a rich nation like Norway. To have a term of comparison, in 2019 a digital giant like Google he had consumed “only” 12.2 terawatt hours.

All this is aggravated by the fact that in many cases the countries where mining is practiced most are developing economies. In which electricity production still relies heavily on fossil sources. According to an analysis by New Scientist, CO2 emissions related to bitcoin could soon exceed those of some European nations. The British scientific magazine cites in this regard a study published in Nature Communications and directed by Guan Dabo, professor of economics of climate change at the Tsinghua University in Beijing.

The scholar has in fact calculated the overall impact in terms of greenhouse gas emissions of bitcoin mining, claiming that it will reach in China i 130 million tons of CO2 in 2024. A figure higher than what Italy disperses into the atmosphere every year. The trend was also confirmed by another study, published once again by Nature, according to which cryptocurrency “factories” risk compromise climate goals that China has fixed itself. Starting with the zeroing of net greenhouse gas emissions by 2060.

Suffice it to say that the entire process of creating and trading bitcoin consumes over 90 terawatt hours of electricity per year. More than a country of 5.5 million inhabitants, like Finland, consumes. All reasons that lead this activity to take root in countries, such as Kazakhstan, where energy is cheapcausing a rise in prices.

Finally there is the theme of electrical and electronic waste. To increase the speed of “dice games”, that is the speed with which bitcoins are extracted, the replacement of computers is frantic, so much so as to cause problems for their disposal. According to the calculation of an economist contacted by the New York Times, Alex de Vries, the power needed to mine cryptocurrency roughly doubles every year and a half, making it necessary to replace the machines.

From China to Kazakhstan, the geography of cryptocurrencies

Damage to the climate is one of the reasons that drove the entrepreneur and visionary Elon Muskpersonality of 2021 according to Time, to back down and no longer accept bitcoin for the purchase of its electric cars, the Tesla. This is due to the concern “about the rapid increase in the use of fossil fuels in mining and for transactions” related to cryptocurrency.

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But, above all, it is the governments that move. In mid-2021, China decided to crack down on mining, blocking all activities in Sichuan province, where numerous factories are concentrated. The measure follows that of 2017, which decreed a prohibition throughout the national territory. Which, however, followed wide tolerance by the authorities. A choice similar to that made by two other nations, the Kosovo e l’Iranwhich in the face of continuous blackouts have decided to ban the creation of bitcoin.

Also in China, the stop to activities was also decided in Qinghai, in Inner Mongolia. Result: China’s ability to contribute to mining was reduced by 90 percent, according to the Global Times. Thus, many have decided to move elsewhere. And one of the nations that has welcomed the bitcoin factories is Kazakhstan: a paradox, given the severe energy crisis running through the former Soviet republic. And that I am causing a profound political crisis with riots popular and the intervention of troops sent from Moscow his richesta of Kazakh President Qasym-Jomart Toqaev. “The demand for electricity it increased by 8 per cent in Kazakhstan in 2021 – explains the Uzbek website Kun, as reported by the Courrier International -, compared to a usual growth of 2 per cent ”. This is precisely due to “the massive transfer of miners from China”, Especially starting from the month of September.

Which confirms how, in any case, the question must be addressed on a scale global. Because the emissions, whether they come from China, Iran or Kazakhstan, end up in the earth’s atmosphere in any case. A study by the World Inequality Database indicated that 2,500 billion tons of CO2 have been lost since the pre-industrial period. If we want to limit the growth of the global mean temperature at a maximum of 1.5 degrees Celsius between now and the end of the century, we can still afford to waste, at most, 300 billion tons. At the current rate, according to the analysis, we will run out of the “bonus” between now and 2028.

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