Stanley Estrada / AFP via Getty Images
El Salvador’s president announced Wednesday that the state-owned geothermal power plant will begin harnessing the energy of volcanoes to mine bitcoin.
The social media announcement came a few hours after the Central American state Congress voted to make cryptocurrency an acceptable legal tender.
“I just instructed the president of @LaGeoSV (our state-owned geothermal power company) to submit a plan to offer #Bitcoin mining facilities with very cheap, 100% clean, 100% renewable energy with zero emissions from our volcanoes.” President Naib Bukele tweeted… “It will evolve quickly!”
Bitcoin mining requires a lot of heat due to the fact that it is harmful to the environment, as it requires a huge amount of electricity to power computers that generate invisible currency.
But cryptocurrency accelerators, e.g. Twitter CEO Jack DorseyBitcoin mining is said to lead to more renewable energy projects like the one announced in El Salvador.
How much energy are we talking about?
There is a decentralized bitcoin transaction ledger known as the blockchain.
New entries in this book are created when someone – or rather their computer – solves a complex mathematical problem to validate previous transactions.
Significant payout possible. If you solve one of these puzzles, you can process the next block in this huge ledger and earn yourself or “mine” 6.25 bitcoin, which is worth nearly $ 230,000 today, plus any transaction fees.
It turns out that this requires enormous computing power both for the operation of ultra-fast machines that solve these mathematical problems, and for their cooling when overheated.
Since bitcoin miners are located all over the world, the total electricity bill is huge.
According to the Cambridge Bitcoin Electricity Consumption Index, mining bitcoins around the world uses about 105 terawatt hours of electricity per year. The university estimates that this is more than all the electricity consumed annually in the Philippines.
Such revelations have sparked outrage over the high environmental costs of bitcoin mining.
They also prompted companies to find cleaner, cheaper ways to mine valuable cryptocurrency. Forbes reported that a company called Northern Bitcoin has set up a data center in a former Norwegian metallurgical mine and uses hydroelectric and wind power to power its computers, as well as cold water from a nearby fjord to cool machines.
With geothermal energy, for example, the one that is planned to be used in El Salvador, an incandescent volcano heats water underground, creating a powerful stream of steam that can spin turbines and generate electricity.
Bitcoin experiment in El Salvador
El Salvador new law makes Bitcoin legal tender by joining the US dollar as the country’s only official currency.
According to the law, about 70% of the country’s population does not have access to “traditional financial services.” President Bukele expressed the hope that making bitcoin legal tender will stimulate investment in the country and increase the well-being of its citizens.
The law also requires the government to provide Salvadorans with “the necessary training and mechanisms” to access bitcoin transactions.
It is not clear whether other countries will follow suit.
Critics warn that the value of cryptocurrencies is volatile. And a spokesman for the International Monetary Fund said the definition of bitcoin as legal tender “raises a number of macroeconomic, financial and legal issues that require very careful analysis.”