The Banking Executive Magazine - November 2022 Issue

the United Nations Framework Con- vention on Climate Change (COP27), held in Egypt from 6 to 18 November 2022, seeks renewed sol- idarity between countries to deliver on the landmark Paris Agreement, for people and the planet. Heads of State, ministers, and negotiators, along with climate activists, mayors, civil society representatives and chief executive officers (CEOs) gathered in the Egyptian coastal city of Sharm el- Sheikh for the largest annual gather- ing on climate action. COP27 builds on the outcomes of COP26 to deliver action on an array of issues critical to tackling the climate emergency, from urgently reducing greenhouse gas emissions, building resilience, and adapting to the inevitable impacts of climate change, to delivering on the commitments to finance climate ac- tion in developing countries. FUTURE INVESMENT I NITIATIVE AT A GLANCE The sixth edition of the Future Invest- ment Initiative (FII) was held in Riyadh from 25-27 October 2022, and gathered the world’s foremost CEOs, policymakers, investors, en- trepreneurs, and young leaders to shape the future of international in- vestment and the global economy. Many experts at the FII see that cryp- tocurrency, is world-changing and pave the way for big opportunities. It gives the possibility to innovate out- side of central banks while abiding by laws and regulations to make daily lives more comfortable. Although the cryptocurrency space as a whole is still viewed as an un- known territory in finance, the crypto panel at the FII argued that cryp- tocurrency should be included in in- vestment portfolios, and be properly regulated. CRYPTO CURRENCY CLIMATE IMPACT According to the Guardian news, en- vironmental damage of producing cryptocurrency averages 35% of its market value over the past five years. The digital currency’s disproportion- ate harm to the climate comes from its reliance on a computing process to verify transactions called “proof- of-work mining”, which requires huge electricity expenditures. Researchers examined, the climate damage from cryptocurrency miners and found out that the damage ex- ceeded the value of the coins pro- duced, overwhelmingly due to high electricity consumption. IMPACT OF CRYPTO CURRENCY MINING According to Coinbase, mining is the process that Bitcoin and several other cryptocurrencies use to generate new coins and verify new transactions. It involves vast, decentralized net- works of computers around the world that verify and secure blockchains, the virtual ledgers that document cryptocurrency transac- tions. In return for contributing their processing power, computers on the network are rewarded with new coins. It is a virtuous circle: the min- ers maintain and secure the blockchain, the blockchain awards the coins, the coins provide an in- centive for the miners to maintain the blockchain. There are three primary ways of ob- taining bitcoin and other cryptocur- rencies: by buying them on an exchange like Coinbase, receiving them as payment for goods or serv- ices, or virtually mining them. Specialized computers perform the calculations required to verify and record every new bitcoin transaction and ensure that the blockchain is se- cure. Verifying the blockchain re- quires a vast amount of computing power, which is voluntarily con- tributed by miners. Bitcoin mining is a lot like running a big data center. Companies purchase the mining hardware and pay for the electricity required to keep it running and cooling it. For this to be prof- itable, the value of the earned coins has to be higher than the cost to mine those coins. Every computer on the network races to be the first to guess a 64-digit hexadecimal number known as a “hash”. The faster a computer can make guesses, the more likely the miner is to earn the reward. The winner updates the blockchain ledger with all the newly verified Cryptocurrency ISSUE 167 NOVEMBER 2022 the BANKING EXECUTIVE 31