This meant that money transfers can be done very quickly without paying bank fees and taxes. Not only that, but bitcoin owners are also protected with anonymity as they are only represented with ID codes.
As the spokeswoman for the Bitcoin Foundation, Jinyong Englund, says, “We have finally figured out how to send value over the internet – faster, cheaper, and more securely. We are not going to unlearn that.”
Bitcoin is a digital currency that is generated through solving mathematical problems without a government or bank to control it, and as such it’s the only currency that involves no inflation or devaluation.
An adage says “If it seems too good to be true, it probably is.” What could possibly go wrong with digital currencies such as bitcoin?
Its legality, security, and uncertain future remain hot issues. China, for instance, has prohibited its banks to use digital currencies; Russia has also illegalized bitcoins. Security is also a concern since a bitcoin owner’s computer can be hacked, lost, or damaged.
Bitcoin is considered as a destructive technology by Mark Williams, an ex-bank regulator and current finance professor at Boston University. “At this point, it’s a virtual experiment being tested in the real world, and we’re seeing lots of weaknesses,” he said.
Aside from these issues, its current price has spiked last Thursday to $15,000, making it too expensive for an investment that has an uncertain future.
Not only that, its massive consumption of electricity is also growing concern –250 kilowatt-hours per bitcoin transaction, according to Alex de Vries, a bitcoin critic watching the industry on Digiconomist website. This huge power consumption is already equivalent to the weekly consumption of an average American household.
Why would a single bitcoin transaction require such huge energy? Bitcoins are limited to a supply of 21 million units and as the available number of bitcoins available decreases, the level of difficulty of complex mathematical problems to be solved also increases that more computers are needed to solve them and gain a single bitcoin.
Bitcoin mining companies have built large warehouses filled with highly energy-consuming servers to decrypt the mathematical problems. China’s bitcoin mining company, Ordos, has eight buildings occupied by 25,000 mining computers, which make up the $39,000 daily electric bill.
What is more alarming is that the bitcoin industry uses coal-powered electricity. “Bitcoin’s biggest problem is not even its massive energy consumption, but that the network is mostly fueled coal-fired power plants in China,” De Vries said.
This could threaten the world’s effort in reducing carbon footprint should this currency continue and be the mainstream currency.
In defense of the bitcoin community, Global Financial Access’ blockchain engineer, Elaine Ou, states that its electric consumption would eventually stop increasing and cease to a certain level:
“What’s more, bitcoin’s consumption won’t necessarily keep rising as it has. Data centers, for example, have gotten a lot better. Not long ago, the Department of Energy was predicting that their electricity use would double every five years, and Google was getting slammed for consuming enough to power 200,000 homes.
“In recent years, though, the centers’ total electricity use has flattened even as their number has kept growing. As it turned out, better cooling and power management technology improved efficiency. Bitcoin miners are no less motivated by profit, so it stands to reason that they will seek to become more efficient and employ the cheapest energy available, which generally means hydroelectric plants and other renewable sources.
“It’s easy to criticize bitcoin for being wasteful. But so are many things in life, including airplanes, commuting to work and Sunday Night Football. A return to subsistence farming could drastically reduce our carbon footprint, but sometimes using energy to improve our quality of life is worthwhile.”
