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BITCOIN & GOLD – Environmental and Social Impacts

**BITCOIN OR GOLD?**

A while ago, #dropgold started to trend on social media, the gold industry hit back with articles regarding Bitcoin‘s excessive energy consumption and environmental impacts. I try and break down some of these facts and figures, assess potential issues and long term impacts on our planet and human society. Sources are linked for your own perusal.

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**ENVIRONMENTAL IMPACT OF GOLD MINING**

[https://www.investopedia.com/ask/answers/022315/what-does-grade-gold-mine-refer.asp](https://www.investopedia.com/ask/answers/022315/what-does-grade-gold-mine-refer.asp)

The World Gold Council defines a high-quality underground mine as having a gold ore density between 8 and 10 grams per ton, while a low-quality underground mine has a gold ore density of 1 to 4 grams per tonne. Open-pit mines tend to have a lower grade, but they can be considered very valuable because of the lower average operating costs necessary to obtain them.

[https://www.usgs.gov/faqs/how-much-gold-has-been-found-world?qt-news_science_products=0#qt-news_science_products](https://www.usgs.gov/faqs/how-much-gold-has-been-found-world?qt-news_science_products=0#qt-news_science_products)

* An estimated 244,000 tonnes of gold has been mined.
* An average of 6* grams of gold is mined per tonne of rock.
* 1,000,000/6 = 0.166666 tonnes of rock is processed to produce a gram of gold.
* 40,666,504,000 tonnes of rock processed to produce 244,000 tonnes of gold.

Researchers estimate that gold has been mined for at least 5000 years, with ancient civilisations giving it value by holding and trading it. Previous gold deposits were much richer, even if we can calculate a very conservative 10x* estimate at 60 grams per tonne of rock, that’s still 4 billion (yes billion) tonnes of rock processed to produce 244,000 tonnes of gold. Bear in mind this calculation does not include environmental impacts for creating and transporting people, mining machinery, processing hardware, fuel, mercury, etc to operate a gold mine and transport the final product.

* Open gold mining destroys local habitat and wildlife. Small-scale mining requires mercury to separate gold from sediment, this is poisoning humans and the environment. [https://theconversation.com/gold-rush-mercury-legacy-small-scale-mining-for-gold-has-produced-long-lasting-toxic-pollution-from-1860s-california-to-modern-peru-133324](https://theconversation.com/gold-rush-mercury-legacy-small-scale-mining-for-gold-has-produced-long-lasting-toxic-pollution-from-1860s-california-to-modern-peru-133324)
* Amazon destruction – Gold mining in the Amazon has increased the pace of deforestation, many areas will not be able to recover thanks to the long lasting damage from pollutants. [https://amazonaid.org/threats-to-the-amazon/gold-mining/#:~:text=In%20the%20Amazon%2C%20this%20has,gold%20underneath%20the%20forest%20floor](https://amazonaid.org/threats-to-the-amazon/gold-mining/#:~:text=In%20the%20Amazon%2C%20this%20has,gold%20underneath%20the%20forest%20floor).
* While some countries have modernised and use new methods such as hydromettallurgy, it’s not enough to combat the impact gold mining is doing to our planet. Also, do you trust the industry enough to comply with all safety standards with hydromettallurgy as it was designed, do you think these processes are audited? We all know if they damage the enviroment they will only get a small fine, miniscule in comparison to the profits they can make by cutting corners.

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**ENVIRONMENTAL IMPACT OF BITCOIN MINING**

* In order to mine Bitcoin, ASICS have to be produced, these tend to only last a year or two and have no efficient recycled programs. ASIC hardware production is the most wasteful aspect of Bitcoin mining, if the mining mechanism stays as Proof of Work for the next 120 years then that will be a significant amount of E-waste produced as new ASIC miners are manufactured to outperform older models. Bitcoin could switch to proof of Stake or another mining mechanism to alleviate this issue.
* Building/converting existing warehouses to house ASIC farms is low to moderate impact, those buildings can be repurposed as general warehouses or torn down with relative ease if they are abandoned.

**Bitcoin Energy Consumption – How much of the network is powered by renewable energy?** Estimates range wildly between 39% (Cambridge Study [https://www.jbs.cam.ac.uk/faculty-research/centres/alternative-finance/publications/3rd-global-cryptoasset-benchmarking-study/](https://www.jbs.cam.ac.uk/faculty-research/centres/alternative-finance/publications/3rd-global-cryptoasset-benchmarking-study/)) to 74% ([https://moneyweek.com/investments/alternative-finance/bitcoin/602678/bitcoin-energy-consumption#:~:text=Research%20by%20Coinshares%20concludes%20that,%2C%E2%80%9D%20says%20strategist%20Tatiana%20Revoredo.)](https://moneyweek.com/investments/alternative-finance/bitcoin/602678/bitcoin-energy-consumption#:~:text=Research%20by%20Coinshares%20concludes%20that,%2C%E2%80%9D%20says%20strategist%20Tatiana%20Revoredo.))

However, all reports are showing a clear trend with an increase in mining facilities placed around renewable energy providers, with hydro leading the pack. I will bet that this trend will grow exponentially and within a few years bitcoin mining will be >90% renewable.

**Future predictions – How Bitcoin could accelerate progress in multiple industries.**
New technologies tend to start as inefficient products, with high energy consumption and low output. These problems are eventually fixed as advances are made over time.

* Bitcoin‘s demand will create improvements in semiconductor production processes, more energy-efficient chips and performance improvements overall.
* Just how electric cars accelerated battery development, Bitcoin will accelerate adoption of renewable energy as miners compete to find the cheapest source of electricity (hydro and wind).
* There will be a synergy between miners and renewable energy producers. As the world continues to adopt renewable energy, there is a new problem trying to figure out how to store surplus energy. Energy grids cannot handle surplus power as it can damage the grid, on some occasions they even have to turn off their renewable energy production to protect the grid [https://www.carbonbrief.org/why-windfarms-get-paid-to-switch-off](https://www.carbonbrief.org/why-windfarms-get-paid-to-switch-off). Bitcoin miners situated near renewable energy sites can now make use of this surplus energy. The grid is protected, the miners get cheap electricity and the suppliers can make a profit, everyone benefits from this.
* Bitcoin accelerates the adoption and growth of renewable energy, demand is going up at such a rate it could pave the way for new breakthroughs in renewables.

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**DEFLATIONARY VS INFLATIONARY SUPPLY**

Bitcoin has a defined maximum supply, Gold’s total supply is unknown. By the time Bitcoin mining “ends” in 2140, some say Gold mining will be carried out on asteroids further diluting the supply. To me that seems far fetched, however there are other gold reserves that have not been discovered yet. As time goes on and technology progress, there will be more attempts at deep sea mining which hasn’t been explored in-depth yet:

[https://sitn.hms.harvard.edu/flash/2019/next-gold-rush-mining-deep-sea/](https://sitn.hms.harvard.edu/flash/2019/next-gold-rush-mining-deep-sea/) [https://www.theguardian.com/environment/2020/dec/09/secretive-gold-rush-for-deep-sea-mining-dominated-by-handful-of-firms](https://www.theguardian.com/environment/2020/dec/09/secretive-gold-rush-for-deep-sea-mining-dominated-by-handful-of-firms)

*The amount of destruction industries could cause if they start mining under our oceans is unimaginable.*

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**SOCIAL IMPACT**

Some people claim Bitcoin causes owners to hoard it and never spend a single satoshi. In practice I have not seen that to be the case at all, people willingly “spend” bitcoin on bills, goods and services. As of now they have to convert it back to fiat as they have no option for direct payment. Fiat is just acting as a middleman for Bitcoin spending, I don’t see that being the case forever. Eventually users will not need to withdraw at all and all services will be payable in bitcoin, note the upward trend and adoption of crypto payment processors and debit cards.

Humans used to trade sea shells and other trinkets, advanced to metal coins.. next came gold backed fiat and then fiat with no backing. I believe cryptocurrency is the next step in this process, it is not too far fetched to assume central banks will eventually hold some bitcoin reserves, as they do with gold.

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**TLDR of my personal opinions:**

* Gold has its own value with multiple physical uses for many industries, Bitcoin cannot replace those.
* Gold has historical value behind it, Bitcoin will take some time to achieve the same established status.
* Comparing Gold and Bitcoin energy consumption makes no sense. Environmental impact is more important, especially when you consider Bitcoin mining is trending towards renewable energy.
* Gold mining is more damaging to the environment and society as a whole.
* Bitcoin will not replace central banks, gold or fiat; but it will help create financial stability for the global economy and be used as a hedge against inflation and unchecked quantitative easing.
* Bitcoin is both a store of value and a currency, the two are not mutually exclusive.

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In the end, humans will give value to what they deem valuable. I believe Bitcoin has already achieved that status.



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4 Comments

  1. I am not an expert by any means, I’m just an enthusiast. I hope we can have some meaningful discussions about this, I’m sure there are many members who can add additional comments or correct any mistakes or assumptions I may have made!

  2. An important thing that isnt said enough is that BTC has the potential to become greener (and potentially even energy efficient if the devs so decide although that would mean shifting away from PoW which I believe is what makes BTC do secure so the shift is unlikely). Gold does not have that potential.

    Its an important distinction.

  3. Yeah, I am sceptical on the innovation and more efficient energy use.

    With returns like those, the environment and marginally more efficiency for brute force computations is just an afterthought, not a priority. And PoS Bitcoin is not coming, look at ETH. Maybe in 20 years.

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