The price of bitcoin has reached US$50,000 (£36,095) – another all-time high. It’s hard to believe that 10,000 bitcoin would only buy a couple of pizzas ten years ago. It’s even stranger to think that bitcoins are completely virtual. You can’t hold one, except on a hard drive, and there’s no underlying asset to them. A bitcoin is simply a digital representation of the computer power needed to make one, what’s called its “proof-of-work”.
This isn’t actually a new idea though. Rai stones were one of the first forms of money used on the Micronesian islands of Yap. To get hold of a Rai, you had to row a canoe for 500km or so to Palau and chisel away at some local limestone. Then you needed to take the 3m-wide lump of rock back to Yap without sinking in the Pacific. No one is quite sure when it started, but the practice is at least several centuries old. Yapese money had no inherent value. For everyone to respect the proof-of-work, the process was deliberately inefficient and incredibly resource-intensive, just like bitcoin
This might all sound like a harmless game of digital bingo. But with more and more people enticed by the heady rewards, bitcoin mining on some days uses as much energy as Poland and generates 37 million tonnes of CO2 each year.
New institutional investors, like the carmaker, Tesla, are driving the asset’s price skywards while ignoring bitcoin’s climate-changing appetite. And to keep the bull market charging, supporters are working hard to argue for bitcoin’s green credentials.