Iran has banned the energy-intensive mining of cryptocurrencies such as Bitcoin for nearly four months, President Hassan Rouhana announced on Wednesday, as the Islamic nation faces major power blackouts in many cities. The country believes that its decision to stop crypto mining will help avoid blackouts in major cities, which could disrupt lives and businesses.
During the same address, President Rouhana claimed that 85% of crypto mining in Iran is illegal and unlicensed. Iranian authorities have been on the lookout for illegal miners. The oil-rich nation even had to hire spies to carry out the so-called war against unauthorised cryptocurrency mining.
"The authorised mining of cryptocurrencies does not consume much electricity and needs just around 300 megawatts. However, it is the unauthorised crypto miners that consume a lot of electricity; they consume about 2,000 megawatts," President Rouhana said, according to a local publication Iran Front Page.
The government will not be distinguishing between licensed and unlicensed crypto mining operations. The announcement said that the temporary mining ban will apply to all miners. "As of today, it will be forbidden even for authorised miners to mine cryptocurrencies until late September," the President added.
Iran which is facing stringent economic sanctions has been focusing on the Bitcoin mining business as a means of acquiring foreign currency and has promoted a government management system that makes domestic mining companies a registration system.
The reason why the government has decided to ban mining this time is the large-scale power outages in the capital Tehran and other areas that occur every day. According to Cambridge University's mining map, Iran is responsible for roughly 4 per cent of Bitcoin's hash rate.
What is Bitcoin mining?
By now, most of you would know that Bitcoin and other cryptocurrencies are based on blockchain technology but, the process to create them is complicated. It is called mining. During this process, computer farms around the world work on a very complex puzzle and when one of these computers get the right answer, a block is added to the blockchain. This verifies the transaction.
How harmful is Crypto mining for the planet?
Not just Bitcoin, but other popular cryptocurrencies like Dogecoin, or Ethereum also require massive computer farms working overtime to mine these coins. These computer farms use up a lot of real-world energy.
According to the University of Cambridge's Centre for Alternative Finance, the estimated annualised consumption of electricity by the Bitcoin network is 149.6 terawatt-hours and growing. To put it in a context that is more than the total energy consumption of countries like Pakistan, Sweden, and Malaysia.
According to a Bank of America report, rising Bitcoin prices have led to an astronomical surge in carbon emissions. Over the past two years, the historic rise of Bitcoin has caused emissions to increase by over 40 million tons which is equivalent to 8.9 million cars added to the road.
At a time when the countries across the globe are owning up responsibly towards human-induced climate change by cutting their emissions, cryptocurrency mining might put a dent in the plan to limit the rise in average global temperature to 1.5 degrees Celsius above the pre-industrial levels.
If renewable energy, such as solar or wind power, was used to drive the energy consumption needed for mining it would not have had much negative impact on the environment. But the fact remains that most of the world's energy is still produced from fossil fuels.
Elon Musk was probably right
Elon Musk and Tesla were criticised earlier this month when the entrepreneur announced that his car making company will not accept Bitcoin payments because of this cryptocurrency's environmental concerns.
Microsoft founder Bill Gates had also criticised Bitcoin mining for using more electricity per transaction than any other method known to mankind.
The Tesla chief was probably right, and the impact can now be seen on many countries including Iran.
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