A ‘pointless way of using energy’?
The amount of energy needed to power the Bitcoin network is staggering: Tim Berners-Lee, credited as the inventor of the World Wide Web, has gone so far as to describe “Bitcoin mining” as “one of the most fundamentally pointless ways of using energy.”
Bitcoins don’t exist as physical objects, but new coins are “mined”, or brought into circulation, through a process that involves using powerful computers to solve complex mathematical problems. This process requires so much energy, that the Bitcoin network is estimated to consume more energy than several countries, including Kazakhstan and the Netherlands. And, as fossil-fuelled power plants still make up a major portion of the global energy mix, Bitcoin mining can be said to be partly responsible for the production of the greenhouse gases that cause climate change (although, so far, the impact on the climate is far less than that of heavy hitters such as the agriculture, construction, energy, and transport sectors).
Another problem is the amount of energy needed for each transaction, which is enormous in comparison to traditional credit cards: for example, each Mastercard transaction is estimated to use just 0.0006 kWh (kilowatt hours), whilst every Bitcoin transaction consumes 980 kWh, enough to power an average Canadian home for more than three weeks, according to some commentators.
An important driver of sustainable development?
Despite these issues, UN experts believe that cryptocurrencies and the technology that powers them (blockchain) can play an important role in sustainable development, and actually improving our stewardship of the environment.
One of the most useful aspects of cryptocurrencies, as far as the UN is concerned, is transparency.
Because the technology is resistant to tampering and fraud, it can provide a trusted and transparent record of transactions. This is particularly important in regions with weak institutions and high levels of corruption.
The World Food Programme (WFP), the largest UN agency delivering humanitarian cash, has found that blockchain can help to ensure that cash gets to those who need it most.
A pilot programme in Pakistan showed that it was possible for WFP to get cash directly to beneficiaries, securely and quickly, without the need to go through a local bank. The project, Building Blocks, has also been successfully trialled at refugee camps in Jordan, ensuring that WFP could create a reliable online record of every single transaction.
If this can work for refugees, it can also work for other disadvantaged, vulnerable groups. The authors of a report by the UN environment agency, UNEP, suggest that the technology could improve the livelihoods of waste pickers, who eke out a living in the informal economy.
A transparent monitoring system, says the…