Research into lowering the cost of storing renewable energy is anticipated to go more quickly as a result of the need to mainstream bitcoin and regulate cryptocurrency exchanges.
Regulations to simplify cryptocurrency mining will eventually encourage the use of renewable energy, advancing the adoption of cryptocurrencies as legal cash.
Bitcoin is a turbulent topic of conversation in addition to being unstable.
Elon Musk, the CEO of Tesla, merely added “#bitcoin” to his Twitter bio in January, which caused the price of the cryptocurrency to skyrocket by $5,000 in just one hour. Tesla revealed in February that it has purchased $1.5 billion worth of bitcoin. The automaker stated in a filing with the U.S. Securities and Exchange Commission that it will soon start taking bitcoin as payment for its goods, with a few restrictions.
An immediate protest from environmentalists followed the announcement. The carbon footprint of bitcoin is infamously large. According to reports, the bitcoin network used 131.80 TWh of power in 2020 to run the algorithms that drive its “mining” operations. This is comparable to how much electricity Argentina uses.
By May, Musk had changed his mind about accepting bitcoin for Tesla due to environmental concerns. Bitcoin fell to $30,000 in May after reaching a high of $64,829 in April. In addition to giving bitcoin a wild ride, Tesla may have unintentionally brought attention to the environmental impact of bitcoin and other cryptocurrencies. Additionally, it might have sparked a competition to create more ecologically friendly cryptocurrencies.
Bitcoin consumes more energy than many nations combined.
Bitcoin consumes more energy than many nations combined. Statistics from Statista and the Cambridge Center for Alternative Finance
Bitcoin and other cryptocurrencies have existed in a constant “grey area,” lacking credibility, and are frequently called “dirty currency.” Bankers worry that it will render their business obsolete, while governments worry that it would weaken their control over the currency.
However, several countries are taking steps to make it legal tender. Ironically, big banks have either included bitcoin funds into their investing portfolios or are at least considering doing so. These changes will only raise the demand on cryptocurrency to employ renewable energy.
Tesla’s declared goal is to “accelerate the world’s transition to sustainable energy,” which is commendable. Tesla will restart permitting bitcoin transactions once there is confirmation of moderate (50%) clean energy usage by miners with a good future trend, according to Musk. This is an enticing carrot for cryptocurrencies to make the switch.
Can Bitcoin transition from using fossil fuel to using renewable energy?
Production of renewable energy is erratic and difficult to store. However, some countries clearly have an advantage. For instance, nearly all of Paraguay’s energy comes from hydroelectric sources. This indicates that compared to countries that rely on fossil fuels, Paraguay has the largest per capita percentage of renewable energy, meaning that bitcoins produced there will have a lower carbon impact. Paraguay thinks it may become Latin America’s crypto powerhouse for this reason.
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Research to lower the cost of storing renewable energy is also expected to move forward faster as a result of the need to mainstream bitcoin. Additionally, the initial efforts governments are taking to make bitcoin legal tender may eventually result in well-thought-out regulations for cryptocurrency mining and harsh penalties for environmental violations.
One frequently used defense against bitcoin detractors is that fiat currency has a high carbon impact as well. Fiat money has a secondary effect due to the upkeep of thousands of bank branches, the use of fossil fuels by personnel to travel to these locations, and the more than 3.5 million ATMs that are in operation worldwide.
In the discussion, it is frequently forgotten that bitcoin is a very new technology. Like other cryptocurrencies, Bitcoin is developing and will take some time to reach maturity. It will get a little bit closer to becoming ecologically friendly, especially with the encouragement from recent developments. Once the technology strikes a balance, it will become more widely accepted and oblige regulators to incorporate it into existing monetary systems. We might only need to make a few regulation changes to encourage the usage of renewable energy for cryptocurrencies.
The reality on the ground is also strong evidence in favor of legalizing cryptocurrencies. Cross-border transfers may already be done at a minimal cost thanks to some central banks setting the example by permitting cryptocurrency exchanges to function as “remittance and transfer organizations.”
On the other side, China, which provided 75% of the world’s capacity for bitcoin mining, outlawed the practice in June. Analysts claim that one reason for the crackdown is because China is risk conservative and may wish to avoid anything that could prevent the adoption of the digital yuan on a permissioned blockchain (meaning, the government decides who can use the digital yuan). The most likely explanation is that China’s effort to become carbon neutral by 2060 is hampered by bitcoin mining.
Why new cryptocurrency regulations and tools are necessary
Prices for bitcoin dropped by 8.5% afterward. Some cryptocurrencies, like Ethereum and Dogecoin, experienced declines of up to 11%. Why? Since the marketplaces for cryptocurrencies are unregulated, each is governed by its own set of rules.
The need for crypto world stabilization is only exacerbated by these occurrences. Regulations will make cryptocurrency mining more efficient and eventually encourage the use of renewable energy, advancing its chances of becoming recognized as legal tender.