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As of Wednesday, El Salvador’s government announced that it would use electricity generated by volcanoes to mine Bitcoins, this was due to one single fact: The congress of the Central American nation voted to accept bitcoin as legal tender earlier this week.
“I’ve just instructed the president of @LaGeoSV (our state-owned geothermal electric company), to put up a plan to offer facilities for #Bitcoin mining with very cheap, 100% clean, 100% renewable, 0 emissions energy from our volcanos,” President Nayib Bukele tweeted. “
This is going to evolve fast!” Several people have accused bitcoin mining of harming the environment because the computers that generate the invisible currency use a massive amount of electricity. But mine bitcoins, including Twitter’s CEO Jack Dorsey, say the cryptocurrency could lead to more renewable energy, like that being built in El Salvador.
The cost of bitcoins mining:
Known as a blockchain, Bitcoin transactions are kept on a decentralized ledger. In order to verify previous transactions, someone – or rather their computer – must solve a complex mathematical puzzle. There’s a possibility of big payouts.
If you solve one of those puzzles, you get a chance to process the next block in that massive ledger and earn yourself, or “mine,” 6.25 bitcoins, which are worth nearly $230,000 today, plus any transaction fees. Due to the sheer number of math problems these machines need to solve and the heat from them overheating, it turns out they also require huge amounts of computing power.
Bitcoin mining utilizes vast amounts of energy with miners scattered all over the globe. Approximately 105 terawatt-hours of electricity are consumed worldwide by bitcoin mining, according to Cambridge Bitcoin Electricity Consumption Index. Outrage over Bitcoin mining has ensued as a result of such revelations.
Exploring alternative solutions:
In addition, companies have started finding cheaper and cleaner ways to mine the valuable cryptocurrency. A company called Northern Bitcoin ran its data center in a former metal mine in Norway and used hydroelectric power and wind power as well as cold water from a nearby fjord to keep its computers cool.
A scorching volcano, such as that slated for use in El Salvador, heats water underground, generating powerful steam that can spin turbines and generate electricity.
As a result of El Salvador’s new law, Bitcoin is now legal tender, joining the U.S. dollar as the only official currency in the country. President Bukele expressed his hope that making Bitcoin legal tender will increase investment in the country and increase its wealth. About 70% of the country’s population lacks access to “traditional financial services.” Salvadorans must also be trained and provided with mechanisms to allow them to participate in Bitcoin transactions, as required by law.
Others may follow suit, but it is not clear yet. The value of the cryptocurrency can be volatile, as critics have warned.
According to an IMF spokesman, the designation of Bitcoin as legal tender raises a number of macroeconomic, financial and legal issues that require careful analysis.