In a Twitter post on May 13th, Musk referred to the increasing use of coal and other fossil fuels to generate the power needed to mine Bitcoin as the reason behind his decision. Bitcoin, Ethereum, Dogecoin and other popular cryptocurrencies reached record highs this year, raising concerns about the amount of energy required to mine coins. Bitcoin mining depots operate 24 hours a day, consuming more power than the whole of Argentina. As energy consumption for cryptocurrency mining increases, so does the amount of coal and waste, exacerbating the climate crisis.
What is cryptocurrency mining?
When trading with Bitcoin, computers around the world compete to complete calculations that create a 64-digit hexadecimal number or fragmentation. This fragmentation is entered into a public logbook so that anyone can confirm the transaction made with Bitcoin. The computer that solves the calculation first gets a 6.2 bitcoin reward, which is about $225.000 at current prices.
Crypto mining is the process by which computer hardware generates calculations so that the network of a cryptocurrency can confirm transactions and increase security. As a reward for their services, miners collect transaction fees for the transactions they confirm. These fees are not withheld by a user, but are new cryptocurrencies, recently created.
That is why it is called mining, since with the process of confirming the transactions, new cryptocurrencies are created (mined) as a reward. Other cryptocurrencies use similar mining technologies, consuming significant energy.
How much energy does mining need?
The Digiconomist Bitcoin Energy Consumption Index estimates that a Bitcoin transaction needs 1.544 kWh to complete, or the equivalent of about 53 days of power for the average US household. Bitcoin mining consumes more energy than Argentina, according to an analysis by the University of Cambridge in February.
How energy consumption causes problems in the environment
Fossil fuels account for more than 60% of energy sources in the United States. The majority of this percentage is natural gas and a minority is coal. Carbon dioxide produced from fossil fuels is released into the atmosphere, where it absorbs heat from the sun and causes the greenhouse effect.
As mining plants consume more energy, nearby power plants have to generate more electricity to compensate, which increases the likelihood of using more fossil fuels.