The Bitcoin (CRYPTO: BTC) price is down 1.4% over the past 24 hours. However, it's still almost doubled in value so far in 2021. One Bitcoin is currently worth US$58,017 (AU$75,347).
According to data from CoinDesk, US$61 billion worth of Bitcoin changed virtual hands over the last full day.
And therein lies a potential pin to deflate the Bitcoin price in a world that's racing to decarbonise.
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Bitcoin's China problem
How do Bitcoin transaction volumes impact greenhouse gas emissions? And what's all this about China?
I was hoping you'd ask.
First, if you're not aware, Bitcoin uses something called the blockchain. Essentially, it runs by a series of unaffiliated computer jockeys to verify and process every transaction. You'll hear this called Bitcoin mining. This occurs as the people or companies running the computers are paid for their efforts with, you guessed it, Bitcoin.
Second, as of this time last year, China accounted for approximately 75% of the world's Bitcoin blockchain transactions. That's largely due to the Middle Kingdom's lower energy costs. Consequently, (greenies, you may wish to look away) analysts say is partly due to the nation's prevalence of cheaper coal-burning power plants.
The problem is this. Many years ago in Bitcoin's infancy, you may have been able to do a spot of mining with a powerful home computer. However, now the companies behind the bulk of Bitcoin transactions run massive computer networks. Consequently, hoovering up astounding amounts of energy in the process.
How much energy does Bitcoin really use?
As reported by Bloomberg, according to a research study at the University of Chinese Academy of Sciences, Cornell University, Tsinghua University and the University of Surrey, Bitcoin blockchain operations are "projected to peak in 2024 at around 297 terawatt-hours, generating 130 million metric tons of carbon emissions".
And that means:
China's energy consumption from Bitcoin mining in 2024 will exceed the total energy consumption level of countries like Italy and Saudi Arabia, the study said, and the carbon emissions will exceed the annual greenhouse gas emissions outputs of countries including the Netherlands, Spain and Czech Republic.
Twenty years ago, when most of the world was merely paying lip service (at best) to the concept of global warming and carbon reduction, these figures would have mattered little.
Today it's a vastly different playing field. Global carbon mitigation efforts and cross-border legislation are likely to become more stringent rather than less over the coming years.
Global and domestic concerns have already seen Chinese President Xi Jinping sign onto the Paris Agreement. China has agreed to hit peak carbon output by 2030 and be carbon neutral by 2060.
While 2030 is still some time off, the move to curb emissions may well Chinese regulators descend upon the nation's multitude of Bitcoin miners.
According to the researchers mentioned above:
Without appropriate interventions and feasible policies, the intensive Bitcoin blockchain operation in China can quickly grow as a threat that could potentially undermine the emission reduction effort taking place in the country.
Depending on how Chinese regulators approach the matter, Bitcoin could be in for some major disruptions.
