Crypto Mining vs. The Environment
Cryptocurrencies have seen massive growth in price and users, but there are still doubts about the consequences of wide cryptocurrency adoption. In particular, many skeptics and environmentalists have raised concerns about the energy consumption of cryptocurrency mining, which may cause increased carbon emissions and climate change.
Is bitcoin bad for the environment? Unlike most forms of currency issued by single entities (usually central banks), Bitcoin is based on a decentralized network. Its transactions are approved by different miners who simultaneously solve complex equations using specific hardware and plenty of energy. But how impactful is Bitcoin, really?
Mining process and its energy cost
Bitcoin’s public ledger is decentralized, which means it is not controlled by any single authority. Instead, Bitcoin is constantly updated by a network of computers around the world operated by so-called “miners”.
These astronomical energy costs are due to the competitive nature of proof-of-work blockchains. Instead of storing account balances in a central database, cryptocurrency transactions are recorded by a distributed network of miners, incentivized by block rewards. These specialized computers are engaged in a computational race to record new blocks, which can only be created by solving cryptographic puzzles.
Cryptocurrency advocates believe that this system has numerous advantages over centralized currencies because it does not rely on any trusted intermediary or single point of failure. However, the puzzles for mining require many energy-intensive computations.
Bitcoin, the most widely-known cryptocurrency network, uses 121 Terawatt-hours of electricity every year, the BBC reported in 2021—more than the entire country of Argentina. According to Digiconomist, a cryptocurrency analytics site, the Ethereum network uses as much power as the entire nation of Qatar.
One major concern among environmentalists is that mining tends to become less efficient as the price of cryptocurrency increases. In the case of bitcoin, the mathematical puzzles to create blocks get more difficult as the price goes up, but transaction throughput remains constant. This means that over time, the network will consume more computing power and energy to process the same number of transactions.
In addition to energy consumption, cryptocurrency mining also generates a significant amount of electronic waste as hardware becomes obsolete. This is especially true for Application-Specific Integrated Circuits, specialized hardware for mining the most popular cryptocurrencies.
Unlike other computer hardware, these circuits cannot be reused for any other purpose, and they quickly become obsolete. According to Digiconomist, the bitcoin network generates between eight and 12 thousand tons of electronic waste every year.
Conclusion
We’ve looked at the environmental costs of the proof-of-work mechanism: a huge energy consumption, a lot of hardware used and e-waste created. Since cryptocurrencies' environmental impacts can’t be – at least to a significant extent – fixed with renewable energy, and considering its other impacts, it is hard to defend it from a sustainability perspective.
References
Reiff, N. (2021). What's the Environmental Impact of Cryptocurrency?. Retrieved 9 November 2021, from https://www.investopedia.com/tech/whats-environmental-impact-cryptocurrency/
3 Surprising Reasons Why Bitcoin Is Bad For the Environment, Starting With Energy Consumption. (2021). Retrieved 9 November 2021, from https://youmatter.world/en/bitcoin-bad-environment-impact/
Cho, R. (2021). Bitcoin’s Impacts on Climate and the Environment. Retrieved 9 November 2021, from https://news.climate.columbia.edu/2021/09/20/bitcoins-impacts-on-climate-and-the-environment/
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