Bitcoin may be good at many things, but being a decent transactional currency isn’t one of them. As an ING economist argued today Bitcoin’s transaction fees and slow speeds mean that buying and selling things with the cryptocurrency simply isn’t realistic. Even the most vocal supporters of Bitcoin admit that it will never replace fiat currencies as ways to transact on a day to day basis. Instead, they argue, Bitcoin is really a ‘store of value,’ more similar to gold than the US dollar.
There is a problem with Bitcoin of a store of value, though. Whereas gold is a metal dug out of the ground, a Bitcoin is really a representation of an amount of past computing power. It takes a certain amount of energy to crack a computational puzzle and generate Bitcoin. It's easy in the beginning, but as more computers join the network the challenge gets harder and harder. These computations are also calculated every time a transaction is registered on the network.
Every 100 Bitcoin transactions can power a home for an entire year - and the amount of energy consumption increases every day.
To demonstrate just how damaging the environmental impacts of Bitcoin are, I created Crypto Offset - a website designed to help you calculate and then offset the damage done by holding crypto currency.
Despite Bitcoin’s idealist roots, it is substantially more environmentally damaging than all other world currencies put together. As it’s a decentralised network, and proof of work is central to how Bitcoin functions, it’s unlikely that this gas guzzling will stop any time soon. Hopefully future crypto currencies will take lessons from this and aim to reduce the environmental devastation of the technology.