According to data from the United Nations Framework Convention on Climate Change, Africa only accounts for 2 to 3 percent global greenhouse gases (GHGs). This number is set to rise quickly due to the growing interest in Bitcoin, a decentralized digital currency, in Africa and particularly Nigeria.
Data from CoinDance, an online platform that provides Bitcoin statistics, shows that Nigeria traded 60,215 Bitcoins, worth more than $566million, between 2015 and 2020 on Paxful, a leading peer to peer Bitcoin platform. This made Nigeria the second largest trader on Paxful, after the US. Usefultulips, an analytics firm, revealed that Nigeria had recorded $25.8 million in Bitcoin peer-to-peer volumes monthly in 2020. This is the highest figure in Africa.
There are many factors that influence the love for Bitcoin in Nigeria. The factors that influence Nigeria’s love for Bitcoin include the large number of unemployed people and high youth population, incessant currency devaluation and poor monetary policies, difficulties in cross-border transfers of funds, unbridled inflation, unstable exchange rate, and various bans on traditional trading platforms. One example is the way the government closed down traditional financing platforms during #EndSARS protests last October, which led to Bitcoin accounting for at least 40% of protest funds.
From an institutional standpoint, the country is involved in many business transactions with China. China is the largest hub for Bitcoin mining. China was responsible for 22% of Nigeria’s imports in 2017. This is because trading in Bitcoin is cheaper than transacting with the Bitcoin mining nation. The coin saw a three-year high due to the pandemic. This led to a more than 100 percent increase in Bitcoin transactions from Nigeria.
It is clear that Bitcoin (and all cryptocurrency) mining is an energy-intensive process. This means that it utilises fossil fuels, which can be expensive and sometimes the dirtiest to make economies of scale. China accounts for 65 percent of Bitcoin mining. Because most of China’s energy comes from coal, mining can result in high levels of GHG emissions.
The Cambridge Bitcoin Electricity Consumption Index shows that Bitcoin uses nearly as much electricity in a year as all of Argentina, up to 121 Terawatt-hours. CNBC reports that Bitcoin mining contributes to about 35.95 million tonnes of carbon dioxide annually. This could surpass the emissions of Qatar and the Czech Republic at the current energy consumption levels.
A single Bitcoin transaction is said to have the same carbon footprint than 680,000 Visa transactions, or 51,210 hours spent watching YouTube. Oak Ridge Institute in Ohio discovered that one dollar of Bitcoin mining requires more energy than it takes to mine copper, gold, and platinum.
Worse, Bitcoin’s price rises means that the mathematical problems required to mine it become more complex. The computers also require more power to process transactions. The Chinese Academy of Researchers found that Bitcoin mining could soon consume more energy than Saudi Arabia and Italy if they are not controlled. “
Larisa Yarovaya is a Southampton Business School lecturer and researcher in International Finance and Fintech. She spoke to the Financial Times and said that cryptocurrency users should take responsibility for their carbon emissions. If this responsibility is to exist, Nigeria will have an astonishingly greater responsibility for GHG emissions than previously thought. A report by Sierra Club highlighted that Bitcoin alone could increase global warming beyond 2 degrees Celsius in just three decades.
Nigeria’s continued support of Bitcoin mining is contributing to GHG emissions. Without a growing market, there can never be sales or mining. The country is now unable to claim a’minimal contribution’ to global GHG emissions as the Nigerian government claims.
There are efforts to shift Bitcoin mining energy to renewable sources. This is evident with Elon Musk’s recent call for the coin. However, it seems that the international community has yet to fully appreciate the contribution the coin makes to carbon-backing economies in developing countries such as Nigeria.