Published in El Pais, 23 January 2021.
Is Bitcoin the future or is the crypto currency threatening it? Bitcoins are a reward for computing capacity that contributes to the development and maintenance of the blockchain. Blockchain is a chain of blocks of information that provides insight into the status of processes in progress. The computing power of participating computers and data centers is used to guarantee the correctness and completeness of the status in the chain. Such a chain of information can relate to the transfer of money or the status and location of ordered goods. Trust is out. We want proof and guarantees and blockchain offers that, is the assumption.
All changes to blockchain must be validated by computing power from computers. And that takes a lot of electricity. Estimates assume an annual energy consumption for the Bitcoin blockchain of 120 billion kWh. That is what energy is consumed in the Netherlands in a year and twelve times the consumption in Bolivia. Much energy is generated by coal and gas power plants and by nuclear power plants. These forms of energy production are controversial. Coal and gas-fired power stations, for example, emit harmful substances. While a large part of the world committed itself in the Paris climate agreement to a brake on global warming through CO2 reduction, many CO2-reducing measures are being nullified by the blockchain development.
Other crypto coins such as Ripple and Ether (Ethereum) have their own blockchain, with associated energy consumption. Yet crypto coins and blockchain are a trend that even asset managers are following. For example, asset manager Jefferies has decided to convert 5% of their investments in gold to Bitcoin. Are they blinded by the rise in value of Bitcoin and are they ignoring the adverse effects of this energy-guzzling sector on the climate?
Asset managers want to invest in accordance with ESG criteria. Money is only invested in companies and sectors that are responsible for Environmental (environment), Social (social) and Governance (governance). How strange is it then that more money is invested in blockchain and crypto coins that are responsible for so much CO2 emissions?
It is true that Ethereum wants to make their blockchain more energy-efficient by no longer having all computers and data centers validate blockchain changes, but is that not at the expense of the promised guarantees and do we not fall back on trust? Will we soon have blockchain that does not do what they promise, and have we created a monstrosity that accelerates climate change?