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How virtual bitcoin production is ‘killing the planet’

How virtual bitcoin production is 'killing the planet'
Existing only in the digital sphere but currently worth a fortune, it is the virtual currency that has gone mainstream in recent weeks.  However, it has emerged that the production of bitcoins uses so much energy it threatens to seriously harm the planet. In recent months investors have flocked to the currency that exists only in cyberspace and is traded directly from person to person. But its very success had led to fears about the environmental impact of the Bitcoin phenomenon. The process by which the currency is produced in the digital world uses an enormous amount of energy, much of it coming from the carbon fuels that cause the most pollution. Total electricity use in bitcoin mining has increased by 30 percent in the past month, according to accounting firm PwC. Bitcoin electricity consumption Alex de Vries, an analyst for at PwC, who started the Digiconomist blog to show the potential pitfalls in cryptocurrency, said: “The energy-consumption is insane. If we start using this on a global scale, it will kill the planet.” One major producer, Bitmain Technologies Ltd, runs a server farm in Erdors, Inner Mongolia, housed inside eight 100-meter-long metal warehouses, with about 25,000 computers dedicated to solving the encrypted calculations that generate each bitcoin. The entire operation runs on electricity produced with coal, as do a growing number of cryptocurrency “mines” popping up in China. Bitcoin | Your essential guide The global industry’s use of power is thought to equal that required for three million U.S. homes, topping the individual consumption of 159 countries, according to the Digiconomist Bitcoin Energy Consumption Index. And as more bitcoin is created, the difficulty rate of token-generating calculations increases, as does the need for electricity. Christopher Chapman, a London-based analyst at Citigroup Inc, said: “This has become a dirty thing to produce.”. Bitcoin was devised by an unknown individual or group under the name Satoshi Nakamoto as a system that awards virtual coins for solving complex puzzles and uses an encrypted digital ledger to track all the work and every transaction. As the market grew from one limited to gamers in 2009 to a global phenomenon this year, ever-more computing power was needed by large networks. Bitcoins are created as a reward for a process known as ‘mining’ and can be exchanged for other currencies, goods and services. Prices have surged more than 2,000 percent in the past year on some exchanges and touched a record of more than $17,900 on Friday. Bitcoin price: last 365 days But according to a recent study of the industry by experts at Cambridge University, China – which gets about 60 percent of its electricity from coal – is the biggest operator of computer “mines” and probably accounts for about a quarter of all the power used to create cryptocurrencies. About 58 percent of the world’s large cryptocurrency mining pools were located in China, followed by the U.S. at 16 percent, the study found. Bitcoin server farms in provinces such as Xinjiang, Inner Mongolia and Heilongjian are heavily reliant upon coal-generated electricity for powerl. Estimates of how much electricity goes into making cryptocurrencies vary widely — from the output of one large nuclear reactor to the consumption of the entire population of Denmark. Analysts agree that the industry’s power use is expanding rapidly — especially after a price rally that made bitcoin almost four times more valuable than just three months ago. Some analysts dismiss claims of bitcoin’s environmental impact as alarmist, noting that even the highest estimates of demand account for only about 0.1 percent of what the world uses. Meet the real-life ‘everyday’ Bitcoin investors However, bitcoin’s algorithm dictates that after a certain number of tokens are created, more work is required for the next batch, said James Butterfill, head of research and investment strategy at ETF Securities Ltd. in London. Using estimates of electricity prices and the rising speed with which calculations must occur, Mr Butterfill estimates the marginal costs of each bitcoin will more than double from $6,611 in the fourth quarter to $14,175 in the second quarter of 2018. At the start of 2017, the cost was $2,856. With costs rising, there’s a greater risk for investors should prices tumble. FAQ | Bitcoin “You’d be hard-pressed to find anywhere where it isn’t profitable to mine,” said Mr Butterfill,  who set up computers at his home to mine tokens in his spare time and joined a network of 120,000 others to boost processing capacity and returns. “But if you’re investing in a bitcoin rig, you have to look at the long term, and with the volatility as high as it is, it probably still doesn’t make sense to mine bitcoin in Europe.” Not all cryptocurrency mining is dirty. Computers in Iceland are powered by geothermal plants. Even in China, some are clustered around hydroelectric facilities in Sichuan and Yunnan. In Austria, Hydrominer IT-Services GmbH put servers inside hydro-power plants. Michael Marcovici, the firm’s founder said: “It is bad for bitcoin to have this news all the time about this dirty energy. People don’t want dirty energy to be used. But the problem is, in Europe, the energy is just too expensive.”

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