Now is the time to retire from Bitcoin
The rise in the price of cryptocurrencies has increased the demand for electricity to produce cryptocurrencies, writes the professor. John Quiggin.
Two recent developments in financial markets directly oppose the future of the global climate. On the other hand, every financial institution sells carbon-based fuel. On the other hand, we are increasingly embracing one of the most absurd and destructive trends these days: cryptocurrencies: Bitcoin.
First of all, good news. Until very recently, withdrawals from coal mines and coal-fired power plants were symbolically morally carried out by socially-oriented investors who were willing to narrow their investment options rather than profit from the destruction of the environment. It looked like a gesture. After all, social investors Well done. On the other hand, the hardliners who kept the miners and the oil companies in their portfolios lost a lot.
Immerse yourself in the present, divestment is the norm, but the process is usually done in a series of small steps. At this point, almost all financial institutions in the developed market economy have limited their exposure to coal and have strategies in place to end their connection to the steam coal used to generate electricity. (Coal for metallurgy is used in steelmaking and, unlike solar and wind power, is in its early stages of development).
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As recent research shows, the key question for financial institutions is “the sadness to income ratio”. Loans or investments in coal are guaranteed to attract hostile attention not only from environmental activists but also from regulators. The future assessment of regulators necessarily rests on the premise that the global commitment to decarbonize the economy will be met.
On the other side of this equation, the risk of investing in coal becoming a âstranded assetâ keeps increasing. Most of the global companies (with the notable exception of Glencore) have sold coal assets and suffered significant losses in the process.
As a result, most mines are now owned by marginal managers who are prepared to make sufficient profits in the short term. These companies prove that they do not represent a major credit risk and that financial institutions are reluctant to deal with it.
The result was recently revealed. Parliamentary Inquiry Called by the instigation of pro-coal members George KristensenCoal miners such as White Haven and New Hope complained that it was nearly impossible to get funding from Australian banks. Asian banks were willing to lend to coal, but were postponed for lack of their own backing. Additionally, as Japanese and South Korean lenders participate in the pullout movement, China is increasingly becoming the sole source of financial support for coal.
The aim of the study was to pressure Australian financial institutions to support coal, but this appears to have been counterproductive. Even during the hearing, Macquarie Bank announced a complete coal withdrawal by 2024. Australian Prudential Regulation Authority It explained its exposure to climate risk and warned financial institutions that it must limit its holdings accordingly.
Its importance in blockchain and the current cyber warfare
Digital infrastructure platforms could become the next tool of cyber warfare as trust wanes and tensions between world powers increase.
The progress of the coal withdrawal contrasts with the enthusiastic acceptance of Bitcoin and other cryptocurrencies. Once used to replace existing currencies as a medium of exchange, cryptocurrencies are now only used as speculative assets and only as a means to conduct illegal transactions such as: Ransomware payment.
“Proof of Work” The process by which Bitcoin and other cryptocurrencies are generated “Miner Using specially designed computers and large amounts of power, we compete to solve increasingly sophisticated but devoid of mathematical problems meaning.
A few years ago the power used in mining Bitcoin was calculated. Comparable Meet the aggregate demand of a small country like New Zealand. However, as prices rose, demand for electricity resources increased until abandoned coal-fired power plants were reopened. Even though Bitcoin is mined using renewable electricity, that electricity must be diverted from other uses and depends on coal or gas electricity.
Amid growing concerns about the destruction of the environment by virtual currencies, Green “How To Produce Them.” This kind of past effort has failed but will likely succeed. But there is no time to wait. Financial institutions must withdraw from cryptocurrencies and financial regulators must shut them down. Whenever an environmentally friendly version emerges, it can be considered again.
John Quiggin He is professor of economics at the University of Queensland. His new book, The Economic Consequences of the Pandemic, will be published by Yale University Press at the end of 2021.