El Salvador’s president announced on Wednesday that the country’s state-owned geothermal energy company would begin using energy derived from volcanoes to mine Bitcoin.
The social media announcement came just hours after the Central American nation’s congress voted to make cryptocurrency an acceptable legal tender.
“I just instructed the president of @LaGeoSV (our state-owned geothermal electricity company) to come up with a plan to provide #Bitcoin mining facilities with very cheap, 100% clean, 100% renewable energy and zero emissions from our volcanoes.” President Nayib Bukele tweeted. “This will evolve fast!”
Bitcoin mining has suffered a lot from being harmful to the environment, as it requires huge amounts of electricity to power the computers that generate the invisible currency.
But the cryptocurrency boosters, as Twitter CEO Jack Dorsey, say Bitcoin mining could lead to more renewable energy projects, like the one being announced in El Salvador.
How much energy are we talking about?
There is a decentralized Bitcoin transaction ledger known as a blockchain.
New entries in this ledger are created when someone – or rather your computer – solves a complex math puzzle to verify past transactions.
There is a potentially significant payment. If you solve one of these puzzles, you can process the next block in that huge ledger and earn yourself, or “mine”, 6.25 Bitcoin, which is worth almost $230,000 today, plus any transaction fees.
This, it turns out, requires immense computing power to run the super-fast machines that solve these math problems and cool them down when they overheat.
With Bitcoin miners located all over the world, the overall energy bill is huge.
According to Cambridge Bitcoin Electricity Consumption Index, Bitcoin mining around the world uses about 105 terawatt hours of electricity per year. That’s more than all the electricity used annually in the Philippines, the university estimates.
These revelations generated indignation about the high environmental cost of Bitcoin mining.
They also led companies to find cleaner — and cheaper — ways to extract the valuable cryptocurrency. Forbes reported that a company called Northern Bitcoin has set up a data center in an old Norwegian metal mine and uses hydroelectric and wind power to run its computers, as well as cold water from a nearby fjord to cool the machines.
With geothermal energy, like the one intended to be used in El Salvador, the scorching volcano heats water underground, creating a powerful steam wave that can spin turbines and generate electricity.
El Salvador Bitcoin Experience
El Salvador new law gives legal tender to Bitcoin, joining the US dollar as the only other official currency in the country.
According to the law, around 70% of the country’s population does not have access to “traditional financial services”. President Bukele said he hopes making Bitcoin legal tender will boost investment in the country and increase the wealth of its citizens.
The law also requires the government to provide “the necessary training and mechanisms” for Salvadorans to have access to Bitcoin transactions.
It is still unclear whether other countries will follow suit.
Critics warned that the value of the cryptocurrency is volatile. It is a International Monetary Fund spokesman said the designation of Bitcoin as legal tender “raises a number of macroeconomic, financial and legal issues that require very careful consideration”.