Climate Finance | May 18, 2021

Bitcoin’s energy consumption has crypto investors seeking green alternatives

Dennis Price
ImpactAlpha Editor

Dennis Price

ImpactAlpha, May 18 – Elon Musk sent the cryptocurrency world reeling last week when he backpedaled on Tesla’s offer to accept Bitcoin as payment for its electric cars. Musk cited concerns “about rapidly increasing use of fossil fuels for Bitcoin mining and transactions.”

Powerful computers that “mine” the digital currency by solving complex math problems consume massive amounts of energy. According to the Cambridge Bitcoin Electricity Consumption Index, Bitcoin’s annualized energy consumption is currently 144 Terawatt-hours, or roughly 0.66% of total electricity consumption.  Estimates vary on how much Bitcoin is mined with renewable energy.

Musk’s U-turn on Bitcoin has crypto investors looking for green alternatives.

  • Can a crypto ETF claim ESG status? A crypto exchange-traded fund was among the 10 exchange-traded funds with ESG labels that were filed with the Securities and Exchange Commission in April, according to an analysis for ImpactAlpha by Sustainable Research and Analysis. The SEC has been reluctant to approve cryptocurrency ETFs. For its part, the Viridi ESG Crypto Mining ETF claims to be reducing negative environmental impacts of mining. The fund will invest in equity securities of companies actively involved in cryptocurrency mining, manufacturing computer equipment and creating cryptocurrency themselves. Go deeper.
  • Green coins. Chia, a coin launched earlier this month by BitTorrent creator Bram Cohen, relies on unused disk space rather than computing power to validate financial transactions on its Chia Network blockchain. Chia’s founders claim the process is more decentralized and energy efficient. Cardano, Polygon, Cosmos, XRP, Nano, Polkadot, Stellar and other coins also are developing less energy-intensive validation mechanisms. Cathie Wood’s ARK Invest, one of Tesla biggest proponents, calls Musk’s concern with Bitcoin’s energy consumption misguided. “We believe the impact of bitcoin mining could become a net positive to the environment,” the ETF manager wrote in a note to investors.