Bitcoin Mining

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Published: February 26, 2022

Author: C. Michael Hogan

Topics:
The Avalon Bitcoin mining machine

Bitcoin mining is a software technology of monetary extraction involving currency transactions in the medium known as Bitcoin, using internet protocols. (Davis, 2011) Bitcoin mining is an extremely energy intensive process.(Glmein, 2013) Bitcoin use has been employed with certain criminal activities (Ball, 2013), tax evasion and money laundering. (Newlands 2018). For example, Iran initially sought to ban bitcoin use, until that country discovered Bitcoin use can be employed to circumvent sanctions. (Vice.com, 2020) (Ratna, 2020) Current indications are that Russia is utilizing Bitcoin to circumvent sanctions imposed during the Ukraine invasion. Numerous studies have linked a major motivation for Bitcoin use is in the conduct of criminal activities. (Lee, 2013)

Carbon Footprint

The carbon footprint of bitcoin mining is extremely high, as well as total pollution footprint; the total pollution footprint would consider impacts of toxic pollutants such as sulfur dioxide. The carbon footprint of bitcoin use and mining has been estimated as high as 23 megatons of carbon dioxide annually (and growing); this value is roughly the carbon output of the entire country of Egypt or greater than the carbon emissions of Chevron.(Stoll et al, 2019)

International Considerations

Some of the appeal of Bitcoin use is the ability of its use to circumvent national or international law. For example, extracting one's assets from some countries like Iran was almost impossible before use of Bitcoin.(Ratna, 2020} Notably Iran and Russia view Bitcoin as a mechanism to evade international sanctions. (Morrow, 2022) (Ratna, 2020) It is well known that Russian oligarchs and dictators in Iran and other terrorist countries routinely use cryptocurrencies to elude international sanctions. In spite of the significance of this elusive behavior by Putin and oligarchs at the time of the Ukraine invasion, (Euronews, 2022) the Biden administration has been reluctant to take steps to rein in such cryptocurrency evasion, for fear of "provoking" Russia.,(Bloomberg, 2022) However, recently the White House issued an announcement that they will at least study the matter of how extensive the cryptocurrency use has become in evading sanctions.

Vulnerability to Fraud

Numerous large thefts have occurred using Bitcoin and other cryptocurrency holders as targets.(Shane, 2018) For example, in first half of 2018, $761 million of cryptocurrencies was stolen from exchanges. (Chavez, 2018) There are several vulnerabilities of Bitcoin theft and fraud that have yet to be resolved, including the proven technique known as double spending, which is a particular threat to merchants. (Bonadonna, 2013) (Karame, 2012) Money launderers have also been attracted to Bitcoin to evade standard money laundering rules. For example, Roman Sterlingov was arrested on 27 April 2021 for laundering $336 million US dollars. According to reports from a US IRS Criminal Investigation, Sterlingov was the chief operator of a Cryptocurrency tumbler Bitcoin Fog, which was started in 2011 (Reuters, 2021)

Numerous websites have been discovered which systematically steal bitcoins, either in e commerce fraud or intercepting escrow transactions.(Mandalia, 2013) Considerable numbers of prosecutions have resulted, although many of these thefts go unrequited.

Ambiguity of Finite Supply of Bitcoin

While Bitcoin and some other cryptocurrencies have been promoted as an asset of finite quantity, the ability to mine Bitcoin effectively allows the number of Bitcoins to continually expand. A more accurate characterization of Bitcoin quantity is that at any point in time there are a finite number of Bitcoins, and that the most popular projection of mining is that at some future time point mining will become unprofitable, leading to a possible endpoint of a truly finite number of Bitcoins that can exist.

See Also

References

  • Ball, James (2013). "Silk Road: the online drug marketplace that officials seem powerless to stop". theguardian.com. Guardian News and Media Limited. Retrieved 20 October 2013.
  • Bloomberg (2022) Cryptocurrency is a Potential Tool for Billionaires to Elude Sanctions. Retrieved Feb 24, 2022
  • Erik Bonadonna (2013). Bitcoin and the Double-spending Problem. Cornell University. Retrieved 22 October 2014.
  • Karame, Ghassan O.; Androulaki, Elli; Capkun, Srdjan (2012). Two Bitcoins at the Price of One? Double-Spending Attacks on Fast Payments in Bitcoin. International Association for Cryptologic Research. Retrieved 22 October 2014.
  • Chavez-Dreyfuss, Gertrude (2018). Cryptocurrency exchange theft surges in first half of 2018: Reuters. Archived from the original on 4 July 2018.
  • Gimein, Mark (2013). Virtual Bitcoin Mining Is a Real-World Environmental Disaster. Bloomberg Business. Bloomberg LP. Retrieved 22 April 2015.
  • Davis, Joshua (2011). "The Crypto-Currency: Bitcoin and its mysterious inventor". The New Yorker. Oct 10, 2011. Archived from the original on 1 November 2014. Retrieved 31 October 2014
  • Euronews (2022) U.S. Considers study of Cryptocurrency to Elude Sanctions. Retrieved 8 March, 2022
  • Lee, Timothy B. ( 2013). Here's how Bitcoin charmed Washington. Washington Post. 10 October 2016.
  •  Ravi Mandalia (2013)  Silk Road-like Sheep Marketplace scams users; over 39k Bitcoins worth $40 million stolen. Techie News. Retrieved 2 December 2013.
  • Allison Morrow (Feb 24, 2022) Financial sanctions are easier than ever for Russians to evade. Thank Bitcoin CNN News
  • New York Times (Feb 22, 2022) Russia Could Use Cryptocurrency to Evade US Sanctions
  • Newlands, Chris (9 July 2018). Stiglitz, Roubini and Rogoff lead joint attack on bitcoin. Financial News. Archived from original on 11 July 2018. Retrieved 11 July 2018.
  • Tanya Ratna (2020) Iran has a Bitcoin Strategy to Beat Trump Foreignpolicy.com
  • Reuters (2021) U.S. arrests alleged 'Bitcoin Fog' money launderer  www.reuters.com. Retrieved 31 October 2021.
  • Shane, Daniel (2018). Billions in cryptocurrency wealth wiped out after hack. CNN. Archived from the original on 11 July 2018. 
  • Stoll, Christian; Klaaßen, Lena; Gallersdörfer, Ulrich (2019). The Carbon Footprint of BitcoinJoule3 (7): 1647–1661. doi:10.1016/j.joule.2019.05.012.
  • "Iran Is Pivoting to Bitcoin". vice.com. 3 November 2020. Retrieved 10 November 2020.

Citation

C. Michael Hogan (2022) Bitcoin Mining. Encyclopedia of Earth.. National council for Science and Environment. Washington DC.