The Way Forward:The Environmental Consequences of Bitcoin and a Possible Solution

Abstract

There is a concerning rise in the energy consumption of Bitcoin due to its increase in Carbon Dioxide emissions. In 2020, such emissions were similar to that of a country the size of Austria or Portugal. In the coming decades, Bitcoin is expected to contribute to a 2°C increase in global temperatures. Environmental organizations across the globe are demanding some sort of mitigation. We propose a solution that we believe, if implemented correctly, could reduce Bitcoins emissions without forcing miners to update the version of Bitcoin they are mining with. Our solution is similar to the process where food is certified to be organic, except with cryptocurrency and renewable energy. A study by the University of New Mexico suggests that if 88.4% of miners would run their rigs using clean energy, it would take climate damages per coin from 35% to 4%. Our solution could be possible by having a third party organization be in charge of running a certification process for which Bitcoin gets certified as being renewably mined. This can be done through the certification of specific miners as opposed to the individual Bitcoin itself. Such a solution would uphold the principles that many Bitcoin users hold dear: decentralization and anonymity. Since many organizations and individuals claim to be environmentally focused, our hope is that they would prefer to buy more of the renewably mined Bitcoin, instead of the alternative. In particular, many companies that are incharge of pensions tend to claim that they are environmentally friendly, which is proven through their investing in environmentally friendly companies. As such companies explore the world of cryptocurrency, our hope was that they would choose to invest in renewably mined Bitcoin as opposed to the alternative. This would then artificially inflate the price of the “clean” Bitcoin and/or lower the price of the “dirty” Bitcoin, which provides incentive for miners to participate.