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OM in the News: Crypotocurrency’s Damage to the Environment

April 19, 2021

Bitcoin mining is consuming 66 times more electricity than it did back in late 2015, and the carbon emissions associated with it will likely face increasing scrutiny, according to BusinessWeek (April 13, 2021).

As of this month, global power demand by the Bitcoin network reached an annualized 143 terawatt-hours, about 4% higher than Argentina’s total electricity generation in 2019. “As the value of Bitcoin rises, so should its energy consumption,” says Citigroup analysts.

bitcoin

Carbon emissions related to cryptocurrencies have become a concern for climate watchers amid a surge in Bitcoin mining in China (where 2/3 of the mining takes place), and where the electricity for such operations is partly supplied by coal-fired plants. The expansion of Bitcoin mining may face increasing regulations because of its climate impact.

“Mining and use of these ‘coins’ is energy-intensive and could face greater regulatory scrutiny as adoption expands, especially if the U.S. continues to scale its crypto footprint and market-leader China cracks down on Bitcoin mining if it adversely impacts its climate goals,” says Citigroup.

Miners process Bitcoin transactions through vast arrays of computers that require huge amounts of energy to run. The mining’s heavy energy usage is due to its reliance on “proof of work”–a computing method that is designed to be inefficient to keep currencies transparent and decentralized. Proof of work forces miners to solve crypotographic puzzles in an intense race of trial and error, with computers making 160 quintillion attempts per second to produce a new block. This competition keeps immense numbers of computers working at top speed, 24/7 all over the world.

Classroom discussion questions:

  1. How is this an OM issue?
  2. How does bitcoin mining impact sustainability (see Supp. 5 in your Heizer/Render/Munson text)?
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