in mid-may 2021 billionaire elon musk
sent a tweet that crashed the
cryptocurrency market
the tesla ceo announced the electric
vehicle company would no longer be
accepting bitcoin for purchases
due to its environmental impact people
have long been warning about the
you know insane amount of energy that's
required to to mine bitcoin
so why does bitcoin use so much energy
and do
other cryptocurrencies have the same
problem
most of the money we use today has been
issued by a central bank
you're familiar with them the u.s
federal reserve
the european central bank or the bank of
japan for example
what made bitcoin and other
cryptocurrencies revolutionary was
cutting these
institutions out of the picture and
using a decentralized
ledger known as blockchain instead to
learn more
i called in one of cnbc's resident
crypto experts ryan brown
hi ryan people around cnbc were saying
that you were
one of the main guys to go to when you
were talking about cryptocurrencies
having been covered this space for you
know nearly
four i think four years now it's
definitely been
you know a learning experience what was
one of the
early big hurdles for this kind of
digital currency
one of the big problems with
cryptocurrency
was the question around double spending
and this is essentially the idea that a
coin
you know virtually could be used more
than once
and that would essentially be theft
right and if that were to
happen i mean confidence would be
completely lost in
in the bitcoin network so how did they
solve this issue
well this is where bitcoin mining comes
in
now every computer in the network has a
full list of bitcoin transactions
to make sure that they're valid if one
single participant in the network
doesn't have the same list
everything falls apart this is how they
prevent theft from happening
so if person a is sending bitcoin to
person b
that transaction needs to be verified by
miners
once verified each part of the
blockchain needs to be updated with that
transaction
miners are then rewarded in some bitcoin
okay i know that's a lot but
stick with me mining was this ingenious
solution to a big
problem but it also has problems of its
own
the whole point of cryptocurrency mining
and what makes it so secure
is this uh proof-of-work mechanism that
underpins everything
miners effectively have to solve these
very complex
math puzzles that are generated every 10
minutes the point of this is to make
sure that the blockchain
is cryptographically secure so that we
don't have any of those security issues
that we've mentioned now the result of
that you then have
more computers being logged on to the
network essentially
right and this process takes up a lot of
energy
that's correct and as the price goes up
more and more miners will want to
reap the rewards because it can be
potentially very lucrative right we've
seen the price of bitcoin
rise wildly this year sometimes they
will
combine into these mining pools which
pull together
computing resources to effectively
improve their chances of tracking that
puzzle so you're just going to get more
and more energy being consumed
all over the world large-scale
electricity consumption is measured in
terawatt hour which is equal to 1
trillion watts
a report by cambridge university says
that the bitcoin network
alone consumes more than 116 terawatt
hour per year about 0.5 percent of total
electricity in the world
bitcoin's annual electricity consumption
is higher than countries like the
netherlands
philippines and singapore in fact if
bitcoin were a country it'd be number 33
on the list of top energy consumers
so how is that possible there is a
direct correlation people have been
noticing
between the rising price of bitcoin and
the level of network difficulty and
competitiveness of all these miners
trying to participate in in the network
over time
and so it just gets higher and higher
and is this just a bitcoin problem
what about other crypto it's definitely
not just a bitcoin problem
those other cryptocurrencies some of
them are using the same
protocol that the bitcoin uses which
requires you to
use all of this computing power to
figure out those puzzles
so where is this mining taking place the
u.s
russia kazakhstan and malaysia are all
big players
but the vast majority some 65
is happening in china a lot of miners
will
migrate to sort of southwestern
provinces in china which are rich in
hydropower which obviously is a
renewable source of energy
now on the flip side of the cheapest
source of energy is fossil fuels
that is where bitcoin mining gets a
little dirtier
in iran when it comes to bitcoin mining
one of the big concerns
there was it started leading to
blackouts
power outages in parts of the cities and
that really speaks to just
the amount of energy that is required to
mine cryptocurrency
china united states they all have carbon
neutral targets
but they're countries with noteworthy
mining facilities or at least mining
habits right
so how are these governments responding
we have
already seen signs of increased
regulation from
the u.s on cryptocurrencies at the
moment in china the
inner mongolia region has effectively
cracked down on mining by
shutting down bitcoin mining completely
cryptocurrency advocates however
argue that all this energy use is worth
it if it means
crypto can democratize the world's
financial system
crypto advocates also say that they are
making efforts to use renewable energy
and that it's not just them consuming
energy
online banking platforms and data
centers use a lot of energy too
global data center electricity demand
was about 200 terawatt
hour in 2019 which makes up 0.8 percent
of global electricity demand we need to
look
at the entire internet and how it is
powered right and at the moment
it is by and large quite dirty the
effort going forward will be
making sure that the internet is powered
by renewables
and you've got massive tech companies
mind you like amazon
microsoft and others they are trying to
do exactly this
the only counterpoint that you know
critics of bitcoin will have is well
how much is bitcoin used as opposed to
all of these online platforms and
services that we use every single day
the general consensus is it's
fractionally
much lower now an interesting thing
about ethereum is that it's trying to
you know become a bit more energy
efficient so it's actually in the
process of upgrading its network
i'm finding it hard to understand how is
that possible if they're
using the same technology using the same
blockchain technology
i don't blame you at all nessa this
topic it is
almost intentionally difficult to
understand
what the ethereum network is essentially
proposing is that it upgrades itself
to a new protocol now this is very
significant because it would move
ethereum
into a new mechanism which essentially
validates transactions
and the validators of those transactions
they don't have to do all those
complex computing puzzles that we've
been discussing
i had to ask ryan is there any
cryptocurrency available out
there that's actually worth it to mine
or at least able to break even
if you're a believer in crypto you
certainly think it's worth the
massive computational effort to mine
cryptocurrencies because believers in
cryptocurrency will say well it is
a decentralized currency it's outside of
government
control i mean the remarkable thing
about cryptocurrency is that it survived
for so long
through all the sort of hacks and
scandals
and questions about money laundering and
illegal activities
they still you know seeing lots and lots
of money
flowing into them and you know right now
it is
a trillion dollar market at least and
that certainly says something about the
potential staying power of these
cryptocurrencies
now whether all of them will exist in
their current form
in you know several years time that's
obviously up for debate
i have a joke do you want to hear the
joke absolutely how many crypto miners
does it take to change your light bulb
how many a million one to do it and the
rest
to determine who gets the credit
that's kids that's good i'm gonna use
that one