Billion-dollar companies wideness the globe are betting big on Bitcoin (BTC). Recent wringer from European investment manager Nickel Digital Windfall Management found that 20 publically listed companies with a market capitalization of over $1 trillion have well-nigh $9.6 billion invested in BTC. Individual investors are moreover taking an increasing interest in the asset.
The “Third Annual Bitcoin Investor Study” from Grayscale Research found that demand for Bitcoin has risen tremendously. According to the study, 55% of current Bitcoin investors began ownership the windfall over just the last 12 months. Grayscale’s report moreover notes that the market for those interested in Bitcoin investment products expanded to 59% in 2021, up from 55% in 2020 and slightly increasingly than one-third in 2019, reflecting steady growth.
Yet while the world’s enthusiasm for Bitcoin may be increasing, concerns regarding its environmental impact have wilt increasingly unveiled than ever. For example, Grayscale Research moreover found in its investor study that over 30% of investors are concerned well-nigh Bitcoin’s potentially negative impact on the environment. Interestingly, this consideration only became unveiled in 2021, as shown in the report.
Models to summate Bitcoin stat emissions
Given the rising distress over Bitcoin’s stat footprint, new models are emerging that aim to help investors and businesses unwrinkled understand how to ensure their BTC holdings are sustainable. For example, the Frankfurt School Blockchain Center and digital windfall manager INTAS.tech published a study on Nov. 16 outlining a new tideway to offsetting the CO2 emissions caused by the Bitcoin network. The formula ripened factors in two approaches: a transaction-based tideway and an ownership-based approach.
Philipp Sandner, a professor at the Frankfurt School Blockchain Center, told Cointelegraph that windfall managers and investors wideness Germany, in particular, are concerned well-nigh Bitcoin’s CO2 footprint stuff compliant with environmental, social and governance (ESG) standards. As such, Sandner explained that he wanted to create a formula that would enable windfall managers, mining companies, exchanges and individuals to summate the CO2 footprint of their BTC:
“Normally, we assign the largest undersong of CO2 bounty to Bitcoin mining companies, but you still have ETF issuers, companies and exchanges that want to prove to customers that they are doing something well-nigh their CO2 footprint to recoup for their Bitcoin.”
According to Sandner, the goal at the whence of the study was to first compute the global energy consumption of Bitcoin between Sept. 1, 2020 and Aug. 31, 2021. The results show that 0.08% of worldwide CO2 equivalent came from Bitcoin. Based on this number, Sandner remarked that the maintenance of the worldwide Bitcoin network required 37.97 million metric tons of CO2 equivalent.
In order to summate the stat footprint of Bitcoin from an investor perspective, the study notes that companies can either focus on the proportional network usage in bytes in relation to the Bitcoin blockchain growth during a specific time frame or on the value of Bitcoin held for a specific period. According to the document, an stereotype Bitcoin transaction contains 670 bytes on the Bitcoin blockchain, representing an unscientific stat footprint of 369.49 kilograms of CO2 equivalent. Sandner explained:
“These stat emissions can be compensated with a document from the EU Emissions Trading System. One document for one tonne of CO2 is virtually $50, which would equal roughly $18 to recoup for a single BTC transaction. Now, if an investor or visitor was holding one BTC over a year period, this would forfeit roughly two tonnes of stat emissions. If compensated with the EU Emissions Trading System, this would then be virtually $100.”
Benjamin Schaub, senior consultant at INTAS.tech, told Cointelegraph that companies could wield the formula mentioned for transactions and Bitcoin ownership to compute their stat footprint that should then be offset. “What makes this model unconfined is that all the data needed is publicly available. There are no assumptions here, it’s just well-nigh how companies engage with the Bitcoin network.”
Schaub widow that Iconic Holding GmbH, which offers exchange-traded products in Germany, is currently applying this method to ensure sustainability: “We are moreover in discussion with a few very big exchanges. I strongly believe that over the next year major players in the space will superintendency increasingly well-nigh this topic.”
While it’s difficult to predict the future, it’s notable that some major exchanges and exchange-traded funds (ETFs) have started to wield similar approaches to offset Bitcoin’s stat footprint. For example, Schaub noted that the crypto mart BitMEX is attempting to make its BTC holdings carbon-neutral. According to a recent BitMEX Research blog post, the visitor believes that the most constructive way for users and exchanges to evaluate Bitcoin’s stat footprint is through on-chain transaction fees. A BitMEX spokesperson told Cointelegraph that the visitor terminated that each $1 spent on Bitcoin transaction fees can incentivize up to 0.001 metric tons of stat emissions, based on the company’s formula.
There are only a few approaches currently misogynist to help companies offset their Bitcoin stat emissions, with Sandner commenting that transaction fees wilt increasingly important as the Bitcoin network ages. As such, he believes that companies must consider a transaction-based tideway when it comes to ensuring stat neutrality.
Schaub remoter pointed out that the source of electricity stuff used should be taken into account, noting that the model ripened by INTAS.tech and the Frankfurt School Blockchain Center looked at the energy mix as unromantic in the United States and Germany: “This ensures that we can observe increasingly miners rhadamanthine enlightened of this topic and are looking for electricity from renewable sources.”
In wing to exchanges like BitMEX developing models to summate Bitcoin stat emissions, some ETFs are doing the same. For instance, Canadian Bitcoin ETF issuer Ninepoint Partners launched a carbon-neutral Bitcoin ETF in May 2021. Alex Tapscott, managing director of digital resources at Ninepoint, told Cointelegraph that while this was the right thing to do, it moreover benefits the merchantry as a whole:
“Many investors with ESG requirements were concerned well-nigh Bitcoin’s footprint and have stayed on the sideline. We wanted to make it easier for them to be stakeholders and participate in Bitcoin’s upside.”
Tapscott widow that oftentimes, the investors in Bitcoin funds, withal with the miners themselves, are the ones taxing that the industry be increasingly sustainable. Given this, Tapscott believes that in 10 years, Bitcoin will be tropical to 100% renewable: “It may plane help subsidize the minutiae of renewable projects considering it’s a rough and ready proprietrix you can place at source. In the meantime, stat offsetting is a good way to underpass the gap.”
How well-judged are these models?
Although it’s rhadamanthine increasingly important for various companies to offset their Bitcoin stat emissions, it’s vital to recognize the challenges associated with the models discussed.
For instance, Sandner remarked that all of the numbers compiled within the model he helped create are waffly over time. “The hashrate is waffly for example, as we recently saw with the Chinese mining ban. The hashrate dropped by 50%.” As a result, Sandner is enlightened that the fluctuations of metrics must be taken into consideration. He widow that each country has a variegated mix of CO2 intense energy, noting that Norway tends to be greener than other regions. Lastly, Sandner pointed out that the stat prices need to be thoughtfully observed, subtracting that prices have been increasing during December.
Moreover, a BitMEX spokesperson mentioned that the company’s formula is not a perfect methodology, noting that the mart expects and welcomes critique. However, the visitor believes that the formula does modernize on other estimates out there. According to the post, the equation used is fairly simple, as only stereotype Bitcoin prices are leveraged rather than estimates of Bitcoin mining electricity costs.
Sandner ultimately believes that the largest share of work to be washed-up is still ahead, noting that most of these approaches are still emerging:
“The Bitcoin mining steering in the U.S. for instance is trying to find new models. Once these methods have been ripened then companies will need to prefer them, but it’s still too early. Awareness is starting to emerge, but this is just the beginning.”