Bitcoin, a digital currency that uses encryption to verify transfer of funds, operates completely

outside of government and banking regulation. Transactions occur through a digital ledger called the Blockchain. Bitcoin must be 'mined'; this means that they are created via high powered computers solving complex mathematical equations through specialized computer software called Application Specific Integrated Circuits (ASIC). Only 21 million Bitcoin will be developed and made available to the public, after which, no further Bitcoin will be available. This complex currency was developed by the secretive 'Satoshi Nakamoto,' in response to the perceived 'failings' of governments and banks to protect their respective societies from fallout of the global financial crisis. Bitcoin value began nominally and has varied dramatically; it is a volatile currency which has been impacted by shutdowns of bitcoin exchanges and bans by certain governments. Supporters believe that cryptocurrencies such as Bitcoin can be viewed as stable compared to national currencies, which are dependent on the actions of governments and the international currency markets; cryptocurrencies may be valuable for those within nations who have excess

inflation or a weak national currency.

However, Bitcoin has been criticized for:

• Funding criminal activity, given the relative, but not complete, anonymity of financial transactions it affords and the fact that Bitcoin does not operate through regulated third-

party payment providers such as Mastercard or Paypal; this makes it hard for law enforcement to preventatively regulate transactions

• Circumventing government pressure, including pressure to prevent certain transactions

that governments find undesirable (i.e., funding for Wikileaks); as a result, governments

cannot wield financial control over bitcoin transactions in the same way they wield it over transactions made through third party payment

• Potentially becoming a competitor to national currencies
• Operating on 'crypto proof,' rather than trust (like conventional currency); this means that Bitcoin is not backed by anything with inherent value, increasing volatility in its value, particularly as a result of speculation by investors

However, one of the most enduring criticisms of Bitcoin is the large volume of energy

consumption required for production. It has been estimated that the computer power required to

create a single digital token consumes as much, if not more, electricity as the average American

household consumes in two years. Bitcoin's annual energy consumption currently stands at

approximately 70 terawatt hours per year, or 0.33% of the world's total electricity production;

this is roughly equivalent to the annual energy consumption of countries such as Bangladesh and Chile. An individual bitcoin transaction has been estimated to require 80,000 times more

electricity to process than a Visa credit card transaction.

In addition to energy consumed to 'mine' Bitcoin, the Sierra Club estimates that Bitcoin mining

produces 36.95 megatons of carbon dioxide (CO2) annually, a greenhouse gas impact which is

comparable to the entire country of New Zealand.

Until a major crackdown in May 2021, about 65 percent of cryptocurrency mining occurred in

China, a desirable locale for its relatively 'cheap' electricity. Other countries with major mining

operations include the United States, Russia, and Kazakhstan. Though some of these countries

claim that the energy to mine Bitcoin is being attained through renewable resources, it remains

unclear whether this is actually true.

In response to Chinese government efforts to ban virtually all Bitcoin mining, Bitcoin has

become relatively 'greener,' particularly as older, less efficient mining equipment is permanently

being taken offline, saving energy. As a low-margin industry where the only variable cost is

energy, Bitcoin mining operations are incentivized to 'migrate' to locales where they can find the

cheapest sources of energy, which often can be, but is not always renewable.

"The bitcoin network is ruthless in its drive for the lowest cost," said Mike Colyer, CEO of

digital currency company Foundry. "Miners around the world are looking for stranded power

that is renewable. That will always be your lowest cost. Net-net (a migration away from China)

will be a big win for bitcoin's carbon footprint."⁵⁷

Experts assert that Bitcoin mining is a portable market that can be brought to sources of energy.

As 'less-efficient' operations get taken off-line, space is created for new equipment that can

double its energy efficiency.⁵⁸

Reports indicate that much of this 'migration' is coming to the United States, with many of the

new 'miners' planning to power their operations by renewables, or gas offset by renewable

energy credits. It is currently estimated that Bitcoin mining in the U.S. is already 50% powered

by renewables. Experts assert that future investors and eventual regulators will look more

favorably upon operations that are greener, and mining operations have voluntarily sought

locations with ready access to renewable sources of energy.

But not all mining will move to the U.S. Almost 10% of crypto mining occurs in Kazakhstan,

whose coal power plants provide cheap and abundant energy and produce significant carbon

dioxide. Experts predict that larger Chinese mining operations with older, less efficient

equipment will move to Kazakhstan temporarily, as a 'stop over' until they make a more

permanent migration Westward.

https://www.sec.gov/Archives/edgar/data/1396279/000119312507083128/dex141.htm

• Bitcoin: Is the Price Too High?
• Consider the ethical challenges posed in this real-world case, and explain your thoughts on the use of Bitcoin.
• Identify which one of the ethical challenges (one of the criticisms listed in bullet points or the energy consumption) provides the biggest ethical dilemma. Explain the rationale for your answer.
• From a Christian perspective, explain whether you think Bitcoin should continue to be recognized as a digital currency.

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Ethical Challenges in the Use of Bitcoin Bitcoin presents several ethical challenges and one of the most significant dilemmas is its environmental imp... View the full answer