If any of you have asked me about crypto you will have heard me say that I don’t really understand it and therefore I don’t like it. So, I have decided to go and find out more and let you know.
Bitcoin is one of the biggest cryptocurrencies and was started in 2008. Bitcoins are created as a reward for mining and can be exchanged for other currencies, products and services. I have looked up mining and what this means and to be honest I am still none the wiser. I can tell you that it is all about mathematical problems and creating more blocks to add onto chains, but I still cannot quite understand it. It is so different from the Bank of England printing a £5 note and issuing it for me to then spend, that I have to admit that my eyes started closing when I was reading all about it. Anyway . . .
As Bitcoins are electronic and held on computers and you need computers to mine them, they are very energy focussed. You need to power the computers and power the storage facilities and then cool these facilities too.
Compared to alternative payment methods, Bitcoin was claimed to be 20,000 times more energy intensive than Visa!!
The Cambridge Bitcoin Electricity Consumption Index says that per year Bitcoin used an estimated 26.73 Terawatt hours of electricity in 2020, which is more power than used by Argentina or the Netherlands!!
Then there is the electronic waste (e-waste) to consider as well. In order to keep mining, Bitcoin miners need more and more advanced technology. About 37 thousand tons of e-waste are produced every year because of Bitcoin mining!!
Ethereum, another cryptocurrency, uses more energy than Finland.
Some cryptocurrencies do not use this type of mining, but Bitcoin is unlikely to change and it is currently the biggest one. Cardano, another cryptocurrency, claims it is 4 million times more energy efficient than Bitcoin and this energy could come from renewables now and in the future.
Elon Musk has got into crypto too as he owns some bitcoin, dogecoin and ethereum, and Tesla and SpaceX both allow payments for merchandise with Dogecoin. But is he forward thinking or just crazy?
So, if I buy Bitcoin how has it performed as I have heard loads of people who have made lots of money from it?
Market capitalisation of Bitcoin from April 2013 to June 2022
Quite a volatile graph isn’t it?!
There has been money made from it depending on when you have invested and when you took it out. Even with the current economic situation and the instability of the world it is much more volatile than ‘normal’ investments.
Therefore, if you want to dabble in crypto then be my guest, but remember that you need to make sure that the money you put in is money you could lose as you may not see it again.
