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between greenwashing and ecological ideal

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One of the main criticisms of Bitcoin technology is its ecological footprint, due to its appetite for electricity. However, this cryptoactive claims to be the best future ally of the environment… But for now.

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There is something aberrant with cryptos. These digital currencies, which did not exist less than fifteen years ago, are so energy-intensive that it is like adding a country to the world map. It is difficult to have a precise idea of ​​the number of terawatt-hours (TWh) consumed by bitcoin alone, the most widespread crypto, as the subject is so controversial. We often refer to the study carried out each year by the University of Cambridge, which assessed the electricity consumption of the entire Bitcoin network at 96.48 TWh for 2021. This is more than Belgium (84 TWh), twice as much as Portugal (48 TWh) or Switzerland (52 TWh).

Cryptocurrencies can change the lives of billions of human beings living in countries where fiat currency is no longer worth much.

Bitcoin (BTC) is inherently energy intensive. “It only has value because we have to make an effort to produce it and there is therefore an expenditure of energy behind it”, points out Nicolas van Zeebroeck, professor of economics and digital strategy. at ULB (Solvay). And the more successful bitcoin is, the greater the power consumption. This has increased eightfold in five years. Explanation: most cryptocurrencies, including bitcoin, are produced and secured through what is called mining, an analogy with gold mines and the considerable work required to extract nuggets. In the case of bitcoins, mining consists of validating data transactions, with rewards in BTC in the key.

This requires complicated cryptographic calculations on powerful computers. The more bitcoins there are, the more sophisticated the calculations, the more miners must be mobilized. This increases the consumption of electricity, not to mention the high-end computer equipment used by the miners, the manufacture of which also required energy (not evaluated, this one, by Cambridge). Given the success of bitcoins, mining is also now carried out in gigantic server farms installed in Mongolia, Iceland or Russia, with an ecological disaster that we can imagine.

Too much coal

The Cambridge study estimates the carbon emissions due to the work of bitcoin miners at 56.3 million tonnes (Mt) of CO2, in 2021. A figure which has doubled in three years and which, once again, is size of a country, because 56 MtCO2 is the equivalent of the emissions, in the same year, of Peru or Israel and much more than each of the Scandinavian countries (according to figures from the Global Carbon Atlas). Still according to the English university, the major part – i.e. 60% – of the energy mix of the electricity used by bitcoin comes from hydrocarbons, and in the first place from coal (nearly 38%, in 2021). This consequent pollution obviously feeds the arguments against bitcoin, the mining of which is now prohibited in several regions of the world, as recently by the State of New York or, for a year, by China, which dominated this activity. Last March, the European Union came close to banning it.

© National

With the gradual decrease in Chinese mining, the share of coal has fallen slightly in the BTC mix, unlike that of gas, which has continued to increase (see graph above). We understand that, for this sector, consuming less and promoting renewables has become a major issue. In April 2021, a foundation dedicated to fully reducing the footprint of cryptocurrencies by 2040 was established in Zurich, Switzerland. “Bitcoin enthusiasts also put forward initiatives aimed at localizing mining, which has the advantage of being able to be piloted dynamically, near sources of green energy, notes Professor van Zeebroeck. The idea is to consume random production surpluses, often lost, linked to renewables. But these initiatives remain marginal.”

The Ethereum blockchain has just converted to a simpler validation system, requiring only rudimentary computers and, above all, far fewer participants, which will theoretically reduce its appetite for electricity by more than 90%. Minors are replaced by validators, handpicked according to a minimum sum to be committed (50,000 euros) and responsible for ensuring the proper functioning of the network. This validation process, already adopted by smaller cryptos, is very different from that of Bitcoin. “Even if ethereum is the second virtual currency in market value, it is very unlikely that its example will be followed by Bitcoin, which is completely decentralized and whose founder remains a mystery, unlike Vitalik Buterin able to stimulate a movement for Ethereum, according to Nicolas van Zeebroeck. Above all, its developers seem to be attached to the basic idea modeled on the prospecting of gold, which is difficult to find and therefore expensive.

Bitcoin enthusiasts are promoting initiatives aimed at consuming surplus production from renewable energies. But they remain marginal.

In an ideal world

In reality, the real question is: does the societal utility of cryptocurrencies justify the enormous expenditure of energy on which it depends? If it is of no use, Bitcoin is ecologically indefensible. In rich countries, in the United States or in Europe, it is especially popular for speculative purposes, even tax evasion or money laundering. (see box opposite). But in countries where the population is poorly banked and where the currency, very fragile, dependent on the dollar god, generates hyperinflation, bitcoin could prove to be a lifesaver. All you need is a mobile app to use it. El Salvador, 65% of whose inhabitants do not have a bank account, took the plunge in September 2021: bitcoin was adopted there as legal tender.

With the gradual decrease in Chinese mining, the share of coal has shrunk a little in the bitcoin mix.
With the gradual decrease in Chinese mining, the share of coal has shrunk a little in the bitcoin mix. © Getty images

A year later, the results are mixed. One in five Salvadorans would still use the Chivo application to carry out transactions with the queen of cryptos. Same lukewarm enthusiasm for companies in the country, yet forced to accept it as a means of payment. The revolution therefore did not take place. Or not yet. “However, we must not lose sight of the fact that cryptocurrencies can change the lives of billions of human beings living in countries where fiat currency (Editor’s note: decreed by the State and controlled by a central bank) no longer worth much, comments Nicolas van Zeebroeck. In these countries, the societal value of bitcoin could justify the energy footprint, at least as much as an activity like streaming, for example.

BTC enthusiasts go so far as to claim that their digital currency is the environment’s best ally and that fiat currencies, created without bounds since they are no longer linked to gold, are responsible for the current madness. consumerist. But Bitcoin is limited, like the resources of the planet. According to its source code, there will never be more than 21 million units of BTC. The 19 millionth “corner” was mined at the end of March. There remains a balance of two million, the extraction of which is increasingly difficult and slow. “The somewhat philosophical idea behind it is to make cryptos rare so that they gradually acquire value, which would encourage them to be hoarded, rather than spent, and therefore to reduce consumption”, indicates the Pr van Zeebroeck who adds – important nuance – that, to achieve this, fiat currencies would have to disappear completely in favor of cryptos. We can dream…

Scammers paradise

Crypto users now number in the hundreds of millions and not all of them are white as snow. Criminals have invaded this anonymous underground universe where it is difficult (less and less, however) to hunt them down. “We have been closely monitoring the phenomenon of virtual currencies and the risks associated with their use in money laundering and terrorist financing operations for several years,” confirms Kris Meskens, secretary general of the CTIF (anti-money laundering unit). A recent law binds exchange providers between cryptos and legal currencies to the obligations of the anti-money laundering law. “This also concerns ATM distributors dedicated to bitcoins (Editor’s note: there are 21 in Belgium), but “crypto-to-crypto” transactions are not subject to this law,” he adds. Two weights, two measures.

As for the taxation of cryptos, we are only at the beginning, with the resolution of the European Parliament aimed at harmonizing the tax systems of the Member States, whose differences are enormous. Example: Belgium does not tax unless speculative management (difficult to determine) while France taxes at 30% the capital gains made thanks to cryptos. The latter are clearly a means of tax evasion. At the end of October, M6 Labs, a community of crypto researchers, published the list of ten tax havens for virtual currencies, with Switzerland, Singapore and the United Arab Emirates in the lead. “The transnational nature of cryptos makes it difficult to apply national legislation and tax control”, underlines the RJF (network for tax justice) which indicates that 34% of hedge funds in cryptocurrencies are based in the… Cayman Islands.

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