Cryptocurrency From An Environmental Perspective
Cryptocurrency—the first thing to come to mind when hearing this term is most likely along the lines of Bitcoin, investments, or technological innovations. However, not many are aware or concerned about how the environment is being impacted by cryptocurrency. Cryptocurrency is acquired through a process called “mining”, which involves solving computational mathematics problems / complex hashing problems. The computational power and hardware required to mine cryptocurrency consumes a great amount of energy and generates significant amounts of carbon dioxide emissions and electronic waste. While the negative effects of cryptocurrency on the environment have alleviated over time, the threat that this newfangled technology poses to our environmental concerns remains considerable.
Cryptocurrencies such as Bitcoin are mined in a Proof of Work process. In the case of mining Bitcoin, there are two steps before a miner acquires any cryptocurrency. Miners first have to record, process, and verify a certain amount of Bitcoin transactions. After the transactions have been verified, the miner then needs to be the first person to guess a “hash”, which is a 64-digit hexadecimal number. This process of guessing a hash, which may have trillions of different possibilities, takes an enormous amount of computing power and consumes great amounts of energy.
It has been reported that Bitcoin uses more power annually than the entire country of Argentina and that Ethereum, another highly capitalized cryptocurrency, uses as much power as the entire country of Qatar. In addition, studies have shown that the mining of the four cryptocurrencies Bitcoin, Ethereum, Litecoin, and Monero is responsible for three to fifteen million tons of carbon dioxide emissions.
Another environmental concern that stems from the mining of cryptocurrency is the considerable amount of electronic waste that is created as a by-product. Many miners utilize hardware that is specialized for mining cryptocurrency and are typically non reusable. The mining of Bitcoin alone has led to approximately 11.5 thousand tons of electronic waste annually.
Many are concerned about the use of nonrenewable energy sources in the mining of cryptocurrency; due to the fact that miners tend to gravitate towards the cheapest source of energy, fossil fuels such as coal are regularly used, significantly increasing carbon dioxide emissions. China alone was predicted to produce 130 million tons of carbon emissions by 2024 due to Bitcoin, although this prediction occurred before China’s mining exodus. However, the cost of renewable energy sources has been on the decline, becoming less expensive than most nonrenewable energy sources. Because of this, “there is an estimated that 77.6% of crypto-mining facilities are using electricity from renewable sources, while the rest use fossil fuels and nuclear energy.”
While the great majority of crypto-mining facilities are using renewable energy sources, the concept of “Proof of Stake” offers a path to decrease the energy consumption of cryptocurrency even further. Proof of Stake, which is an alternative to the Proof of Work process described above, bases the ability that a miner has on the amount of cryptocurrency that a miner possesses. This essentially means that the amount of cryptocurrency transactions that a miner can record, process, and verify depends on the amount of cryptocurrency that the miner holds; the more cryptocurrency that one has, the greater number of transactions one can “mine.” This eliminates the need to guess for a hash, which significantly reduces the computational power, and thus the energy, required to mine cryptocurrency.
In conclusion, cryptocurrency has many negative impacts on the environment, but they have been shown to lessen over time. The main environmental concerns that stem from cryptocurrency tend to be the significant amounts of electronic waste and carbon dioxide emissions produced from crypto-mining, in addition to the high energy consumption. However, as a great majority of cryptocurrency miners shift from fossil fuels to renewable sources of energy, in addition to shifting from Proof of Work to Proof of Stake, the negative effects on the environment are decreasing over time. This leads me to personally believe that the positive impacts and technological potential of cryptocurrency outweigh the continuously alleviating environmental concerns.