Carbon-neutral Bitcoin? A new approach is being taken to offset carbon emissions from Bitcoin

Some cryptocurrency businesses are now using new models to calculate their Bitcoin carbon footprints.

Billion-dollar businesses around the world are betting big in Bitcoin (BTC). Nickel Digital Asset Management, an European investment manager, recently found that around $9.6 billion has been invested in Bitcoin (BTC) by 20 publicly listed companies. This is despite their market capitalization exceeding $1 trillion. Individual investors are also showing increasing interest in the asset.

Grayscale Research’s “Third Annual Bitcoin Investor Study”, found that Bitcoin demand has increased tremendously. The study found that 55% of Bitcoin investors have bought the asset in the past 12 months. Grayscale’s report notes that Bitcoin investors are now interested in 59%, up from 55% for 2020. This is consistent growth.

While Bitcoin’s popularity is growing, environmental concerns have grown more prominent than ever. Grayscale Research’s investor survey also revealed that more than 30% of investors are concerned by Bitcoin’s potential negative effects on the environment. This concern was only apparent in 2021 as evidenced by the report.

Calculate Bitcoin carbon emissions using models

New models have emerged to assist investors and businesses in understanding how to make their Bitcoin holdings sustainable, given the increasing distress caused by Bitcoin’s carbon footprint. The Frankfurt School Blockchain Center and digital asset manager INTAS.tech released a Nov. 16 study that outlined a new way to offset the carbon dioxide emissions from the Bitcoin network. There are two possible approaches to the formula: one transaction-based and one ownership-based.

Benjamin Schaub, senior consultant with INTAS.tech, explained to Cointelegraph that companies could use the formula for Bitcoin ownership and transactions to calculate their carbon footprint, which should then be offset. This model is great because all of the data is available publicly. It’s not about assumptions, it’s all about how companies interact with the Bitcoin network.

Schaub said that Iconic Holding GmbH, an exchange-traded product provider in Germany, is using this method to ensure sustainability. “We are also in discussions with a few very large exchanges. “I strongly believe that the next year will see major players in this space care more about this subject.”

Although it is difficult to predict the future of Bitcoin, it is notable that major exchanges and exchange traded funds (ETFs), have begun to use similar strategies to offset Bitcoin’s carbon footprint. Schaub pointed out that BitMEX, a crypto exchange, is trying to make its BTC holdings completely carbon-neutral. A BitMEX Research blog post recently stated that on-chain transaction fees are the best way for users to assess Bitcoin’s carbon footprint. Cointelegraph was told by a BitMEX spokesperson that $1 can be spent on Bitcoin transaction fees to incentivize 0.001 metric tons carbon emissions. This is based on the company’s formula.

Only a few options are currently available for companies to offset their Bitcoin carbon emissions. Sandner commented that transaction fees become increasingly important as the Bitcoin network age. He believes companies should consider a transaction-based approach to carbon neutrality.

It’s becoming increasingly important for companies to offset their Bitcoin carbon emissions, but it’s crucial to acknowledge the difficulties associated with these models.

Sandner, for example, noted that the numbers in the model he helped to create are constantly changing. “The hashrate is changing, for example, as we saw recently with the Chinese mining ban. The hashrate fell by 50%.” Sandner knows that there are fluctuations in metrics and this must be considered. Sandner said that every country has its own mix of CO2 intensive energy. He also noted that Norway is more environmentally friendly than other countries. Sandner also pointed out that carbon prices must be closely monitored, noting that they have been rising during December.