A report released by KMPG, one of the world’s main services network adjacent to the likes of PWC, highlights the environmental impact of Bitcoin mining. The study uses data from Harvard Business Review, showing that Bitcoin mining has a minuscule environmental impact compared with the fashion and gold mining industries.
Some may remember Elon Musk removing Bitcoin as a payment option from his flagship company Tesla. At the time, he claimed that Bitcoin mining was incredibly bad for the environment, adding, “We are concerned about rapidly increasing use of fossil fuels for Bitcoin mining and transactions, especially coal, which has the worst emissions of any fuel.”
This came at a time when Tesla offloaded most of its Bitcoin deposits, which led the flagship cryptocurrency to take a dive in price.
However, KPMG’s report shows that Bitcoin mining has far fewer consequences on the environment compared to other industries, such as fashion, gold mining, and, most certainly, automobile manufacturing.
“Bitcoin mining industry has become extremely competitive. Under this competitive landscape, miners are incentivized to streamline their operations and carefully manage production costs.
As electricity is the largest ongoing input cost affecting operations, miners are constantly searching for the lowest cost sources of electricity, which is often tied to underutilized hydro, wind, or solar,” according to KMPG’s report.
According to an article by the World Economic Forum, “Crypto mining can be a catalyst or market driver for new renewable energy projects.” The article also claims that “It is this symbiosis of crypto computer farms and remote green energy projects which offers the potential for mutual benefits — and it may not stop with rural projects.”
KMPG’s report states that “Bitcoin uses a proof-of-work (PoW) consensus mechanism, which is the process of adding transactions to the blockchain by being the first to solve a mathematical problem via computation. This math problem involves repeatedly hashing a block of transactions until a specific output is achieved.
Hashing is the process of taking any string of text as an input and converting it to a fixed-length alphanumeric output.
Given that this is a one-way function, it means that the same input will always result in the same output, but the input cannot be determined with the output alone. Solving this math problem is essentially trying to find a needle in a haystack.
Miners who solve the puzzle first are awarded freshly minted Bitcoin (currently 6.25 Bitcoin per block) as well as any transaction fees which currently account for about 2-3% of miner revenue”
In a nutshell, Bitcoin miners use their computing power to solve mathematical problems in order to gain Bitcoin blocks on the chain as a reward.