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Bitcoin's Role in the ESG Imperative: A Comprehensive Summary of KPMG's Report


Bitcoin and ESG

This is a summary of the original report. You can read the complete report here:

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Introduction to Bitcoin and Mining

Bitcoin, the world's leading cryptocurrency, has emerged as the best-performing asset year-to-date as of July 2023. With only 21 million Bitcoins to be mined, its scarcity and decentralized nature have contributed to its growing popularity and value. But what powers this digital currency? The answer lies in Bitcoin mining.


Bitcoin mining utilizes a proof-of-work mechanism, where miners solve complex mathematical problems to validate transactions and add them to the blockchain. For their efforts, miners are awarded 6.25 Bitcoin per block, plus 2–3% of miner revenue in transaction fees. This process consumes approximately 110 terawatt-hours of energy per year, roughly 0.55% of global electricity use. While significant, this energy consumption is often misunderstood, and Bitcoin's energy use can be creatively harnessed in the ESG journey.


Environmental Impact: Beyond the Numbers

Bitcoin's environmental impact has been a subject of intense debate. Its energy consumption is equivalent to the energy required to run tumble dryers in the EU. However, the paper argues that this consumption is not inherently negative and can align with sustainability goals.


Comparatively, Bitcoin's emissions are less than various industries such as air conditioning (1,950 MtCO2e), tourism (4,500 MtCO2e), and livestock (2,865.2 MtCO2e). The document explores how Bitcoin's potential role in reducing emissions can align with Net Zero goals, emphasizing the importance of understanding its environmental impact in context.


Strategies to Reduce Carbon Footprints: Innovation at Work

Bitcoin's energy consumption has led to innovative strategies to reduce carbon footprints. Miners often utilize under-utilized hydro, wind, or solar energy. In Texas, which represents 59% of the total Bitcoin hash rate volume in the U.S., miners are incentivized to use renewable energy, promoting further renewable production.


During Winter Storm Uri in Texas, Bitcoin miners gave back approximately 1,500 megawatts to the grid. Companies like MintGreen are converting heat from Bitcoin miners into sustainable heat, piloting a project to heat 100 buildings in North Vancouver. Crusoe Energy is also converting flared gas into electricity for Bitcoin mining, showcasing the creative ways Bitcoin can contribute to environmental sustainability.


Social Considerations: Debunking Myths and Driving Inclusion

A 2022 Chainalysis report found that illegal and illicit use of crypto accounted for only 0.24% of total transaction volume in 2022, debunking myths about Bitcoin's role in illegal activities. Bitcoin's transparency can actually aid in tracking illicit activities.


Furthermore, Bitcoin provides an alternative to traditional remittance services, with over 20% of GDP for countries like Honduras, Haiti, Jamaica, and El Salvador coming from remittances. The World Bank estimates that nearly 1.4 billion people lack access to financial services. Bitcoin's decentralized nature offers opportunities to drive a more inclusive economy, such as paying female employees in Afghanistan and serving as an exit ramp to hyperinflation in Turkey.


Conclusion

Bitcoin's role in the ESG imperative is multifaceted and extends beyond mere numbers and statistics. Its impact on environmental sustainability, social inclusion, and potential governance practices is profound and backed by innovative solutions. From reducing carbon footprints through renewable energy to driving financial inclusion in underserved communities, Bitcoin is not just a digital currency but a catalyst for positive change in the global ESG landscape.


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