Is it compatible to allocate part of your portfolio to Bitcoins while being an investor concerned about the future of the planet and the environmental risks of cryptocurrencies? And is Bitcoin solely responsible for this much criticized impact?
Example of a Bitcoin carbon footprint offset solution
The rapid growth of Bitcoin has raised some concerns over the cryptocurrency’s mining-related carbon footprint. By 2021, Bitcoin is expected to consume around 1% of the world’s electricity and sadly, the evidence that more than 60% of Bitcoin’s mining activity depends on fossil fuels is mounting.
According to ImpactScope, the result is a Bitcoin’s carbon footprint of 36 million tonnes of CO₂ per year – the equivalent of 2.5 million diesel cars.
Investors exploring innovative investment solutions that have the potential to enhance returns and manage portfolio risk, are sometimes disorientated when it comes to obtaining scientific data on the energy consumption and carbon footprint of Bitcoin and virtual currencies.
To address this issue, Ninepoint – investment management firms overseeing approximately $8 billion in assets under management – partnered with CarbonX, a fintech of environmental software that drives the transformation towards a low-carbon global economy, and which through its long-standing brand Zerofootprint®, provides carbon emission analysis and carbon offsetting services.
Through this partnership, Ninepoint offers a carbon neutral Bitcoin fund – the Bitcoin Ninepoint ETF – aimed at investors who seek exposure to Bitcoin, while being attracted to investment opportunities that respect environmental, social and governance factors.
CarbonX, along with the Crypto Carbon Ratings Institute,, a leading authority on providing scientific estimates for the energy consumption and environmental impact of cryptocurrencies, will provide the carbon footprint analysis and carbon offsetting solutions for the Fund using carbon offsets from projects that meet the highest global standards.
« By offsetting the carbon footprint of our Bitcoin ETF, we’re living up to our commitment to offer investors better ways to diversify their portfolios. »John Wilson, Co-CEO and Managing Partner of Ninepoint
Specifically, through this arrangement, Ninepoint is supporting various forest conservation projects in the Amazon that, in addition to avoiding the release of carbon dioxide into the atmosphere, are each contributing to the United Nations’ sustainable development goals which have direct positive impacts on the lives of local people in the region.
However, this approach is an offset of Bitcoin’s carbon footprint and not a reduction of the carbon emissions. All costs of offsetting the carbon footprint of the Fund will be paid by the manager, Ninepoint, out of its management fee, and not unitholders of the Fund.
« Bitcoin is both a rapidly growing asset class and increasingly important financial technology. We must all do our part to ensure Bitcoin grows in a more sustainable way. Ninepoint is showing the world one way to do that. Investors increasingly want real ESG solutions for their portfolios, while not sacrificing on diversification. I believe Ninepoint Bitcoin ETF offers the best of both worlds and could be a model for our industry.»Alex Tapscott, Managing Director of Digital Assets at Ninepoint
Prior to its unitholder-approved conversion to an exchange-traded-fund, Ninepoint Bitcoin ETF was a closed-end investment fund with over US$300 million in assets. Ninepoint Bitcoin ETF trades on the Toronto Stock Exchange (“TSX”) in US dollars under the symbol “BITC.U” and in Canadian dollars under the symbol “BITC”.
The environmental impact of digital
Bitcoin and Ethereum (as well as cryptos that depend on ETH) are widely criticized for their environmental impact; they operate in Proof of Work (PoW), a validation which serves to reduce possible embezzlement and to carry out fast and secure transactions. These PoWs are very energy intensive because they require a large amount of computations. On the other hand, Proof-of-Stake (PoS) could significantly reduce the carbon footprint of the blockchain, and if some detractors accuse PoS of a lack of fairness for crypto minors, this practice could be generalized in the objective reduce the environmental impact of cryptocurrencies.
But the digital world keeps on growing and inventing itself. Recently, new investment instruments have been added to cryptocurrencies: the NTFs, those digital artworks that no one has probably failed to notice in the news. Once again, investors wishing to allocate their assets to alternative investments without however exposing themselves to ESG risks face many uncertainties in terms of their environmental footprint. These NFTs are indeed not very ecological with an annual CO2 consumption equivalent to that of a European citizen. Github offers a list of eco-friendly art market platforms for those interested, such as KodaDot ; Viv3 ; NBA topshots); hic et nunc ; Kalamint ; SIGN Art ; Atomic ; Pixeos ; Paras ; NFTshowroom ; Eporio ; Solible ; Lovada ; Stellar NFT
While it is indeed essential to take into account the footprint of Bitcoin and cryptocurrencies, it would be fairer to consider the digital world as a whole including the Blockchain applications, Clouds and data centers for example, without only crystallizing on cryptocurrencies which are only part of this digital ecosystem.
This is the role for example of theEnergie Web Foundation which tends to unleash the potential of decentralized low-carbon technologies, and which in partnership with the Alliance for Innovative Regulation, and the Rocky Mountain Institute (RMI) have launched the Crypto Climate Accord, a private sector-led initiative for the entire crypto community focused on decarbonizing the cryptocurrency industry in record time.
Some companies are specialized in offsetting our self Bitcoin carbon footprint This is the case, for example, of ImpactScope, a Geneva-based company that provides CO₂ compensation solutions to all crypto enthusiasts, Bitcoin miners and digital asset markets. Once calculated, the ImpactScope portal allows logger to select from three environmental projects to offset its amount of tonnes of carbon equivalent. The cost is around $ 20 to clear three onchain transactions.
Investors can also acquire more information on the Digiconomist site, which is a true platform dedicated to expose information on the unintended consequences of digital trends from an economic point of view.
The Cell site also provides advanced studies on issues related to Bitcoin and other cryptocurrencies. This link is a direct access to the latest studies carried out over the past 12 months.
Article: Joana Foglia – Bitcoin Carbon Footprint