What Are The Effects of Cryptocurrency on the Environment?
The cryptocurrency sector nearly tripled in value during 2021, and this trend doesn’t show signs of slowing down too much. As more people find themselves researching and investing in these new currencies, questions about their impact on the environment arise.
Ever since Elon Musk tweeted that he wouldn’t support Bitcoin unless they transitioned to greener energy sources, the environmental impact of cryptocurrencies has been a hot topic.
It’s true — cryptocurrencies pose a potentially significant threat to the planet, and with the rise of climate change, looking into the impacts of the emerging technologies will be critical to creating a sustainable and safe world.
How Cryptocurrencies Work
Cryptocurrency is defined as “a digital currency in which transactions are verified and records maintained by a decentralized system.”
Cryptocurrencies like Bitcoin introduce new coins into the decentralized blockchain (blockchains are the databases where active coins are stored) through the “mining” process.
Mining is done by having computers go through mathematical equations that check variables such as addresses, names, and timestamps to verify the coin. This process allows each coin to be validated and secure, which is essential for a decentralized currency.
Bitcoins can be purchased and traded through crypto exchanges, held in a digital wallet, or used to make online purchases. The value that many find in cryptocurrencies compared to fiat currencies is that cryptocurrency is decentralized and thus not regulated by a government.
The Main Issue
The main concern over mining is that it requires massive amounts of computational energy from powerful computers to be done effectively. As it stands now, many of these mining operations get their power through fossil fuels such as coal.
The University of Cambridge that Bitcoin mining consumes 121.36 terawatt-hours a year; this means that Bitcoin burns through more energy than Google, Apple, Facebook, and Microsoft… combined.
This reckless energy consumption means that Bitcoin alone produces 36.95 megatons of carbon dioxide annually — comparable to the entirety of New Zealand. It is estimated that Bitcoin could single-handily increase global temperatures by two degrees Celsius in 30 years.
Beyond just mining, the energy cost of a Bitcoin transaction is absurdly high. The average transaction consumes over 1,700 kWh of electricity — twice the monthly amount used by the average U.S. home. With millions of transactions being made all the time, it’s no wonder why Bitcoin’s energy consumption is where it is.
Others Environmental Issues
Besides heavy energy consumption, cryptocurrencies pose other concerns on the environment. We’ll be taking a quick look into the following two issues:
- Water Usage
If you’re reading this, you’re very likely looking at an electronic device. The problem with all electronic devices, including computers used for mining, is that they can get extremely hot when put under heavy use.
Bitcoin alone uses as much as 1.3 billion gallons of water daily to keep mining operations active. When the water is discharged, it will be 30–50 degrees Fahrenheit hotter than the body of water it came from, endangering the wildlife and ecology in the area.
To stay competitive, miners will often discard their current hardware every 1–2 years in favor of the newer and more powerful technology available. The result of this is the cumulation of electronic waste.
Electronic waste (e-waste) is a term used to describe discarded electronic devices. The issue with e-waste is that when discarded, toxic chemicals from the devices like mercury and lead spread into the soil, water, and air. It’s estimated that Bitcoin alone is responsible for 11.5 kilotons of e-waste every year, and this number will only grow.
The Future of Cryptocurrency
Just because these are the current problems of most cryptocurrencies doesn’t mean it has to stay that way in the future. Many cryptocurrency developers are making efforts to find more eco-friendly methods of operating.
Finding renewable energy methods for mining and transactions, along with reducing water usage and e-waste, will be a vital part of cryptocurrencies’ fate as the 2020s progress.