A new BBC article reports that Iran has recently announced the banning of cryptocurrency mining, such as Bitcoin, due to the practices heavy electricity consumption.
It is estimated that approximately 4.5% of Bitcoin mining occurs in Iran which has placed severe strain on the nations electricity grid as the heavy electricity consumption from mining caused major cities to suffer major blackouts.
The practice of mining does not refer to traditional mining, Bitcoin mining involves running several highly powered computers which contain state of the art technology 24/7 365 days a year.
Furthermore, the constant running of these machines require lots of cooling to ensure that they don’t overheat which places additional strain on the electricity grid as the consumption of energy from mining is immense.
Consequently, the Bitcoin mining in Iran, 85% of which has been unlicensed, has been draining 2GW of power from the nations energy grid each day.
This means that Bitcoin mining itself consumes more energy than the entire economy of Argentina.
Despite the large costs, the practice of Bitcoin mining is incredibly profitable as the price of Bitcoin for the past years has risen from a few hundred dollars to thousands.
However, in recent days, the price of Bitcoin has dropped, and, there are also the negative externalities associated with the practice such as the strain on the electricity supply of a nation as well as the carbon emissions.
The greenhouse gas emissions from cryptocurrencies have been recently brought to light after Elon Musks Tesla reportedly pulled out of accepting the currency as payment due to it being an environmentally dirty currency as the constant running of computers increases emissions due to their demand for energy.
Because of Tesla’s announcement, the price of Bitcoin fell drastically as Elon Musk has recently developed an online reputation regarding cryptocurrencies as some claim that he plays an extremely influential role over the market due to Tesla’s position making them a somewhat major stakeholder.
After the price of Bitcoin fell, Elon Musk announced on Twitter that Tesla has “diamond hands,” which essentially means the car company is still holding the currency but won’t accept for transactions.
However, this may change in future as Elon is trying to take steps to move Bitcoin mining into being much more environmentally friendly, one this occurs, Tesla may begin accepting the currency as payment one again as the potential “Green Bitcoin” will coincide with Tesla’s brand image which is environmentally friendly electric cars.
But, for the time being, Bitcoin has seen some severe losses as Tesla’s announcement combined with China’s call on banning cryptos has likely raised uncertainty around the price of the cryptocurrency.
So, Iran’s announcement will also likely negatively impact the cryptocurrency market as it is essentially piling on and fanning the flames within the crypto market.
Consequently, if more and more nations choose to regulate the mining of cryptocurrencies, or the whole industry altogether, the likely result will be a fall in the price of these cryptocurrencies as their intended purpose was for them to be used for anonymous transactions, once regulation is introduced, this is much more difficult.
Therefore, once regulation is introduced, cryptocurrencies will no longer be able to fulfil their role, which, in our view, means they have little to no real value as the utility of cryptocurrencies will be non-existence, meaning the only value the coins have will be extremely susceptible to volatile market forces.
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Written by Hubert Kucharski