Bitcoin and its possible negative impact on the environment have been discussed for a long time. It is the energy needed to process bitcoin transactions that fuels the debate on the cryptocurrency’s sustainability.
A study by the Cambridge Centre for Alternative Finance (CCAF) found that Bitcoin consumed about 110 terawatt-hours of energy a year, equivalent to 0.55% of global electricity production. An enormous and unsustainable amount in times of energy saving and consumption cuts.
Now, however, the well-known services firm KPMG has published a detailed report on Bitcoin’s ESG profile, which reaches very different conclusions.
What Bitcoin is
Bitcoin is a digital currency created in 2008 by Satoshi Nakamoto, the pseudonym of the programmer (or group of programmers) who invented it.
The ‘cryptocurrency’ runs on a peer-to-peer network in which users, whether individuals or other entities, do not need intermediaries to carry out and validate transactions between themselves, and therefore without the involvement of a central bank. Users connect their computers directly to this network and download its public ledger, in which all historical bitcoin transactions are recorded.
The KPMG report
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Here are the main points of the KPMG report on bitcoin’s ESG parameters in brief:
given that emissions are a more significant indicator of environmental harm than energy consumption, the report put Bitcoin’s emissions in context against those of other sources, from tobacco to tourism, and found that it is the second smallest contributor after ‘Video (US)’. ‘Bitcoin’s emissions may be lower than is claimed’, the report concludes.
The report outlines the most common strategies for improving Bitcoin’s carbon footprint, such as using more renewable energy and energy produced from methane for mining.
According to the report, Bitcoin’s contribution to money laundering is also minimal compared with the total amount of money laundering worldwide. According to the statistics of the UN office on drugs and crime used by KPMG, money laundering accounts for 2–5% of global gross domestic product, but only 0.24% of Bitcoin transactions. The report also found that laundered money is cashed out in Bitcoin far less than in digital currencies such as Ether, stablecoins or altcoins.
There are also virtuous, ethically oriented use cases, such as fundraising for Ukraine and electrification in rural Africa.
Finally, according to the report, Bitcoin’s governance is solid, as its rules cannot be changed without a fork. ‘This results’, KPMG states, ‘in a system that, thanks to its decentralisation, cannot be exploited or abused by those in power or by individuals with ulterior motives’.
For completeness of information, it should be added that at the end of the report, after acknowledging that Bitcoin remains a largely misunderstood product, KPMG offers a range of consulting services related to cryptocurrencies.
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