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El Salvador’s president announced on Wednesday that the country’s state-owned geothermal energy company would start using power from volcanoes to extract bitcoins.
The message on social media appeared only hours after the Congress of the Central American Nation voted to turn the cryptocurrency into an acceptable legal tender.
“I have just instructed the president of @LaGeoSV (our state geothermal electricity company) to draw up a plan to offer facilities for #Bitcoin extraction with very cheap, 100% clean, 100% renewable energy, 0 energy emissions from our volcanoes,” the president tweeted. Naib Bukele. “This will develop quickly!”
Extracting bitcoins took a lot of heat, as it is harmful to the environment, as it requires a huge amount of electricity to power the computers that generate the invisible currency.
But cryptocurrency boosters, such as Twitter CEO Jack Dorsey, say bitcoin mining could lead to more renewable energy projects, such as the one announced in El Salvador.
How much energy are we talking about?
There is a decentralized book of bitcoin transactions known as the blockchain.
New entries in this book are created when someone – or rather their computer – solves a complex math puzzle to check previous transactions.
There is a potentially significant payout. If you solve one of these puzzles, you can process the next block in this massive book and win yourself, or “mine,” 6.25 bitcoins, which today cost nearly $ 230,000, plus all transaction fees.
It turns out that this requires huge computing power to control the ultra-fast machines that solve these mathematical problems and to cool them when overheated.
With bitcoin miners located around the world, the overall energy bill is huge.
According to the Cambridge Electricity Consumption Index, Bitcoin uses about 105 terawatt hours of electricity per year worldwide. That’s more than all the electricity used annually in the Philippines, the university estimates.
Such revelations have outraged the high environmental costs of bitcoin mining.
They have also led companies to find cleaner and cheaper ways to extract the valuable cryptocurrency. Forbes said a company called Northern Bitcoin has set up a data center in a former Norwegian metal mine and uses hydroelectric, electricity and wind to control its computers, as well as cold water from a nearby fjord to cool machines.
With geothermal energy, such as that to be used in El Salvador, the burning volcano heats the water underground, creating a surge of powerful steam that can spin turbines and generate electricity.
El Salvador’s experiment with bitcoin
El Salvador’s new law makes Bitcoin a legal tender by joining the US dollar as the only other official currency in the country.
According to the law, about 70% of the country’s population does not have access to “traditional financial services”. President Bukele said he hoped making legal tender for bitcoins would 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 access bitcoin transactions.
It is not yet clear whether other countries will follow suit.
Critics have warned that the value of the cryptocurrency is volatile. A spokesman for the International Monetary Fund said that defining Bitcoin as a legal tender “raises a number of macroeconomic, financial and legal issues that require very careful analysis.”