There's an interesting article in Fortune on the true environmental costs of using Bitcoin as a medium of exchange to replace cash, debit cards, credit cards, and other commonly-used payment methods. Given the enormous amounts of electricity needed for bitcoin mining, it is perhaps no surprise that estimates on the high end find it to be an unsustainable proposition. So much for using Bitcoin for everyday transactions?
The [MoneySuperMarket] report states that each Bitcoin transaction consumes 1,173 kilowatt hours of electricity. That's the volume of energy that could "power the typical American home for six weeks," the authors add. The Bitcoin mining that enables a purchase, sale or transfer, it posits, uses a slug of electricity that costs $176. That number is based on an average worldwide cost per kWh of 9.0 cents over the past 12 months.
What it we lower the estimated price per kilowatt hour to 5.0 cents? Some argue that figure is more in line with global energy costs. I am afraid that does little to make Bitcoin any more sensible as a means to transact given the costs of generating these coins still:
So let's reduce the MoneySuperMarket number from 9 cents per kWh to the 5 cents favored by de Vries. That would put the average cost of producing a coin at around $19,000, which looks reasonable (and underscores the industry's gigantic profitability as price hovers at over three times that level). At 5 cents, the electricity cost per transaction would fall from $176 to roughly $100.
For every transaction you make with Bitcoin, that's what you would be paying in electricity costs. When the likes of Visa and Mastercard can process these sorts of transactions for cents, it puts Bitcoin's true costs into sharp relief. The argument that ever-lower cost locations for mining these coins is a solution has its limits too, with these destinations now discouraging Bitcoin mining as power outages arise as a result. The global movement of Bitcoin miners eventually becoming persona non grata is a very interesting story in itself, but I digress...
Bitcoin's drawback is that electricity is finite, and what Bitcoin uses, a family or a business can't use. In several nations, Bitcoin mining is imposing severe stress on the grid. Kazakhstan, one of world's leading crypto mining hubs and a top destination for producers displaced by the Chinese lockdown, is suffering blackouts caused by the industry's sudden explosion within its borders. Its government is limiting producers to a fraction of the electricity they're now deploying. Iran has also suffered severe shortages that's led to ejecting producers, and tiny Abkhazia is raiding mines––many of them illegal––to forestall an energy crisis.
The bottom line is that Bitcoin mining in its current form is unsustainable, and so is its use as a medium of exchange.