This is the first article in a two-part series exploring the cryptocurrency landscape, along with the various regulatory and sustainability issues it faces.
Since its inception in 2009, Bitcoin, the pioneering digital currency, has dramatically reshaped the global financial and technological landscape. Bitcoin’s decentralized structure and innovative blockchain technology have sparked a revolution, positioning it as a significant disruptor in the traditional finance sector.
Over the years, Bitcoin has steadily gained global recognition. Many financial institutions and merchants now accept it as a legitimate form of payment and a viable investment vehicle. The success of Bitcoin has paved the way for other popular cryptocurrencies like Ethereum (ETH), Tether USD (USDT), and Binance Coin (BNB). Moreover, blockchain technology, which underpins these digital currencies, is now being widely applied across various industries, including healthcare, finance, supply chain management, and even governmental services.
According to data from Statista, a leading analytics firm, the global revenue for cryptocurrencies is projected to experience a robust compound annual growth rate (CAGR) of 8.62% over the next four years, potentially reaching $71.72 billion by 2028. The firm also highlighted the steady growth in the number of global crypto users, with an estimated 59 million new users added in the second half of 2023 alone.
Meanwhile, Binance, the world’s largest cryptocurrency exchange, predicts that Bitcoin’s value could soar to $77,560.44 by 2030. With increasing participation, activity, and valuation, the cryptocurrency landscape seems brimming with opportunities. However, like any rapidly evolving technology, it comes with its share of challenges.
Crime and Volatility: The Dark Side of Decentralization
Due to its decentralized nature, cryptocurrencies have often been associated with illegal activities. The ability to conduct irreversible, cross-border transactions within minutes has made crypto an attractive tool for criminals and syndicates. However, this perception might not fully align with reality. Blockchain analysis firm Chainalysis reported that despite the growth in illicit crypto transactions, they accounted for only 0.15% of the total cryptocurrency transaction volume in 2021.
While the potential for misuse exists, governments worldwide are actively working to implement policies and legislation to curb illicit activities within the crypto market. Efforts include international collaboration among law enforcement agencies, licensing and registration for crypto-related businesses, and widespread digital financial literacy campaigns. These measures have shown effectiveness in reducing the volatility of cryptocurrency prices, which often stems from immature markets and speculative investment.
As cryptocurrencies become more mainstream and gain acceptance among governmental and financial institutions, their volatility and reputation are gradually improving. However, as the market evolves, new challenges arise, particularly concerning the sustainability of blockchain infrastructure.
Blockchain’s Environmental Impact: A Growing Concern
Bitcoin’s decentralized transactions are powered by blockchain, a distributed ledger technology (DLT). This system enables secure transactions without intermediaries like banks. However, the process of verifying transactions, known as ‘mining,’ requires significant computational power. Initially, miners were rewarded with 50 bitcoins per block, but this reward halves approximately every four years to maintain scarcity and counteract inflation. The latest halving in April 2024 reduced the reward to 3.125 bitcoins per block.
Critics argue that Bitcoin mining has become an increasingly costly and unsustainable venture due to the enormous energy consumption required to operate mining facilities. As a result, many smaller-scale miners struggle to remain profitable, leading some to resort to illegal activities, such as electricity theft, to continue their operations.
In Sarawak, for example, there have been numerous reports of crypto-mining operations illegally siphoning electricity. Sarawak Energy Bhd (SEB) has estimated monthly losses of nearly RM4 million in electricity revenue since 2018 due to these illegal activities.
The last Bitcoin is expected to be mined by 2140, theoretically eliminating incentives for miners. However, analysts predict that mining will continue, driven by transaction fees rather than block rewards. Additionally, miners may transition to newer, less mature cryptocurrencies as they emerge.
A Future Shrouded in Uncertainty
With an extensive list of advantages and an equally long list of drawbacks, the future of cryptocurrency and blockchain technology remains uncertain. While it is likely to stay in the spotlight for the next decade, its long-term viability will depend on how well the industry addresses its most pressing challenges.
● In the second part of this series, the focus will shift to the sustainability issues surrounding crypto-mining and its future in Sarawak.
