As the world tackles climate change, people have identified that fossil fuels, farming, and industrial pollution are the primary culprits, but recently, there has been a lot of talk about the sustainability of cryptocurrency.
Mining, especially Bitcoin mining, consumes enormous amounts of energy. The race among would-be crypto billionaires to create the most powerful mining rig generates far more electronic waste than “moon shots” or fat bank accounts.
Enjoy reading to find out what we know so far about how much energy crypto produces and the environmental impacts of cryptocurrency.
What’s Cryptocurrency?
Cryptocurrency is a digital currency that is exchanged electronically and uses cryptography for security. The transactions are recorded in a public distributed ledger known as a blockchain and verified by network nodes. Unlike conventional currencies, cryptocurrencies are not issued or backed by a government or central bank.
Bitcoin was the first decentralized cryptocurrency and has since become widely used. Cryptocurrencies are traded on exchanges and can also be held as an investment. As of today, there are over 10,953 active cryptocurrencies, and the combined market valuation of all cryptocurrencies is 1.18T
Bitcoin Mining
Cryptocurrency Energy Consumption
There is no direct way to gauge the energy consumed by Bitcoin and cryptocurrency mining. However, the figure can be estimated based on the network’s hash rate and the consumption of commercially available mining rigs.
According to the Cambridge Bitcoin Electricity Consumption, Bitcoin accounts for an estimated 85 Terawatt-hours (TWh) of electricity (0.38% of worldwide electricity use) and about 218 TWh of energy (0.13% of global energy production) at the point of production—bigger than Belgium and Finland.
Ethereum, the second-largest cryptocurrency network, uses 62.77 Terawatt-hours of electricity annually, based on energy use through July 9, 2022. This amount of electricity is similar to Switzerland’s annual power consumption. An average transaction on Ethereum requires 163 kilowatt-hours of electricity, the same amount of power consumed by one household in the United States daily for 5.51 days.
Why Crypto Mining Needs Energy
The extensive energy use for crypto mining is not a bug but a feature. Bitcoin mining is the process of authenticating Bitcoin transactions through automation without the participation of trusted third parties like banks and governments.
The validation of transactions consumes a great deal of energy; the network relies on the processing capacity of thousands of mining machines. This dependence ensures the security of proof-of-work consensus for cryptocurrencies.
A Mining Farm
A mining farm is a type of data center made up of hundreds, and even thousands, of specialized computers known as ASICs. These servers operate non-stop to mine cryptocurrency continuously. Even though the concentration of these servers in a single location helps to reduce the amount of energy that is used, and even though the specialized ASIC hardware was developed to make better use of the energy that is used, these mining farms still require a massive amount of electricity to keep them operational.
Environmental Impact of Bitcoin Mining
Bitcoin mining has been a heated topic recently, and there is a lot of controversy surrounding it. Many people believe that it’s environmentally harmful and that mining is wasteful. Although this is true, mining also creates many jobs while giving economic benefits to countries worldwide.
The environmental impact of bitcoin mining is debatable, as it depends mainly on the equipment used. Some mining equipment is much more efficient than others, which affects how much energy it uses. The electricity used by bitcoin miners is also not as great as that used by other digital devices, such as computers or tablets.
How to Lower the Environmental Impact of Crypto Mining
Like companies, bitcoin miners have different ecological footprints. Two things, renewable energy, and local weather can help make bitcoin mining contribute to a greener environment.
Bitcoin farms in countries that depend primarily on fossil fuels have a greater impact on the environment than those farmers that are located in countries that diversify their sources of energy by leveraging the use of hydropower, wind power, solar power, or nuclear power.
Until recently, a large concentration of Bitcoin farms was located in China’s coal-burning regions, a relatively inexpensive energy source that fostered profitability but also raised carbon dioxide emissions. In 2021, China banned Bitcoin mining, leading miners to migrate to cheaper locations.
Due to cheap electricity from fossil fuels, Kazakhstan, for instance, has become a hotspot for Bitcoin miners to find a home. However, the recent shutdown of the internet in Kazakhstan and the protests that followed have posed a danger to the stability of the mining industry in the region. On another side, there have been places already using green energy sources to mine, like Scandivania, which leverages hydropower to drastically reduce bitcoin mining’s carbon footprints.
Moreover, the climate of the data centers can influence the carbon footprint of bitcoin mining, as those positioned in colder areas depend very little on artificial cooling systems to keep ASIC servers from overheating, reducing overall energy use.
How Much Crypto Is Sustainable
Around 72% of the world’s Bitcoin mining is carried out in only three countries, which are highly dependent on fossil fuels. But at this time, there is not a sufficient amount of official information available to estimate what percentage used by cryptocurrencies comes from renewable sources.
Even though cryptocurrencies are technically sustainable as they use less energy than banks or credit cards, the mining and infrastructure required to run the cryptocurrency industry are not sustainable. There is still a long way to go before we say it is genuinely sustainable.
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