Although the value of bitcoin has fallen enough to curb the huge energy use of cryptocurrency -- and the related greenhouse gas emissions -- provided that the price remains low. The price of a bitcoin plummeted to below $24000 on June 13 US time, which is about half of its value in March.
Although it has been depreciating steadily for several months, the sudden sharp fall in value in the past 24 hours has made the price below a key threshold of bitcoin's impact on the environment.
Since the price of bitcoin peaked at about $69000 in November, the annual power consumption of the network is estimated to be between 180 and 200 TWH. This is equivalent to the amount of electricity used by all data centers in the world every year.
Higher prices usually encourage more mining because of greater returns. However, the price does not have to hover at the peak, so bitcoin can maintain its desire for energy. According to the research report published last year by Alex de Vries, a digital currency economist, as long as the price remains above US $25200, the annual power consumption of mining operations in the bitcoin network can be maintained at about 180 TWH.
A price lower than the threshold of $252000 may prompt miners to suspend operations or reduce mining because they do not want to risk spending more on electricity than new tokens.
De Vries pointed out: "we are entering the price level, which is becoming more challenging for miners. This not only limits their options for further development, but actually affects their daily operations."
However, it is still too early to make a specific forecast on whether the sharp fall in the bitcoin price will ultimately be beneficial to the environment. Last year's sky high prices mean that miners are likely to have some savings to spend some time. "If this is just a one-day decline, nothing will change," de Vries said. On the other hand, if prices do not rebound quickly, miners may face some difficult decisions.
According to de Vries, if the price continues at about $24000, the global energy consumption of the bitcoin network will be reduced to about 170 TWH per year. This sounds like a gradual change, but it will lead to a significant reduction in electricity use and related greenhouse gas emissions. If we compare it with the annual energy consumption of bitcoin estimated by de Vries in most of 2022, it will be like reducing the power consumption of Ireland for one year.
Bitcoin mining itself is not energy efficient. Miners compete to solve increasingly complex problems by using specialized hardware to verify transactions and obtain new tokens in return. The inherent energy inefficiency brought about by all these calculations is to dissuade anyone from deliberately disrupting the trading books. This is why bitcoin makes many people worry about greenhouse gas emissions from cryptocurrencies.
Bitcoin is the largest player in cryptocurrency, so its swing price is the most important to the environment. But it is not the only one. It is reported that Ethereum, the second largest cryptocurrency network, has also seen its value plummet recently. Therefore, de Vries believes that the potential energy savings -- and the resulting emissions reductions -- may be greater if you take into account the collapse in the prices of other energy consuming cryptocurrencies.