Billion-dollar companies across the globe are betting big on Bitcoin (BTC). Recent analysis from European investment manager Nickel Digital Asset Management found that 20 publically listed companies with a market capitalization of over $1 trillion have about $9.6 billion invested in BTC. Individual investors are also 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 buying the asset over just the last 12 months. Grayscale’s report also notes that the market for those interested in Bitcoin investment products expanded to 59% in 2021, up from 55% in 2020 and slightly more 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 become more apparent than ever. For example, Grayscale Research also found in its investor study that over 30% of investors are concerned about Bitcoin’s potentially negative impact on the environment. Interestingly, this consideration only became apparent in 2021, as shown in the report.
Models to calculate Bitcoin carbon emissions
Given the rising distress over Bitcoin’s carbon footprint, new models are emerging that aim to help investors and businesses alike understand how to ensure their BTC holdings are sustainable. For example, the Frankfurt School Blockchain Center and digital asset manager INTAS.tech published a study on Nov. 16 outlining a new approach to offsetting the CO2 emissions caused by the Bitcoin network. The formula developed factors in two approaches: a transaction-based approach and an ownership-based approach.
Philipp Sandner, a professor at the Frankfurt School Blockchain Center, told Cointelegraph that asset managers and investors across Germany, in particular, are concerned about Bitcoin’s CO2 footprint being compliant with environmental, social and governance (ESG) standards. As such, Sandner explained that he wanted to create a formula that would enable asset managers, mining companies, exchanges and individuals to calculate the CO2 footprint of their BTC:
“Normally, we assign the largest burden of CO2 compensation to Bitcoin mining companies, but you still have ETF issuers, companies and exchanges that want to prove to customers that they are doing something about their CO2 footprint to compensate for their Bitcoin.”
According to Sandner, the goal at the beginning 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 calculate the carbon 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 amount of Bitcoin held for a specific period. According to the document, an average Bitcoin transaction contains 670 bytes on the Bitcoin blockchain, representing an estimated carbon footprint of 369.49 kilograms of CO2 equivalent. Sandner explained:
“These carbon emissions can be compensated with a certificate from the EU Emissions Trading System. One certificate for one tonne of CO2 is around $50, which would equal roughly $18 to compensate for a single BTC transaction. Now, if an investor or company was holding one BTC over a year period, this would cost roughly two tonnes of carbon emissions. If compensated with the EU Emissions Trading System, this would then be around $100.”
Benjamin Schaub, senior consultant at INTAS.tech, told Cointelegraph that companies could apply the formula mentioned for transactions and Bitcoin ownership…
Read More: cointelegraph.com