The Bitcoin Dilemma: Gauging the Environmental Impact
A sustainable approach to cryptocurrency is the future of a global economy.
The article was originally published on WeNaturalists, as a part of the curated section by the editorial team. For similar stories, head to our Explore section.
Have you heard about this decentralized digital currency that is transforming the way the world functions? Yes, we’re talking about the booming cryptocurrency market. A transnational currency such as Bitcoin or Ethereum, which cannot be duplicated, is gaining the attention of millions of investors and the market is growing exponentially.
However, are we aware of cryptocurrency’s environmental impact?
The ‘mining’ of bitcoin which occurs through a “specialized computer software called Application Specific Integrated Circuits (ASIC)” requires tremendous amounts of energy. The energy required is comparable to the annual energy consumption of entire nations, such as Argentina and Ukraine.
Now that we can see the energy impact of cryptocurrency, let us explore why the cryptocurrency is bad for the environment.
GHG Emissions — An Indirect Consequence of Crypto Mining?
The power consumption of Bitcoin has severe implications for the Paris Agreement’s climate goals. If this mining continues for the next 30 years, bitcoin alone can contribute to 2 degrees celsius of global warming.
The carbon footprint of a single virtual coin is the same as 1,879,709 Visa transactions. Bitcoin produces “36.95 megatons of carbon dioxide (CO2) annually” which is synonymous with the annual energy consumption of New Zealand.
Taking such carbon emission rates into consideration, utilizing renewable energy to mine the cryptocurrency seems to be a plausible alternative. However, reports claim that Proof of Work (PoW) mining done by renewable resources accounts for only 39 per cent. Miners still travel to geographies where fossil fuels are available in abundance. Does the environmental impact of bitcoin end with releasing GHG emissions? Or is there more to it?
An Additional Problem? Polluting Water Resources
Private companies are making cryptocurrency mining hybrids from “decommissioned coal power plants”. Environmentalists believe that the waste materials from coal not only introduce toxins into the surrounding ecosystems but also release carbon emissions when burnt.
For instance, about 60 per cent of the grid’s energy in the US comes from fossil fuels. These US-based cryptocurrency companies are using fossil fuels for the majority of their power. Apart from the depletion of non-renewables, Columbia Climate School points out that a particular Greenidge Generation plant in Dresden, New York utilizes millions of gallons of water from Lake Seneca for cooling the ASIC systems, and discharges some water back into the lake at “30–50 degrees Fahrenheit above normal temperature”, thereby disrupting the ecosystem.
E-Waste Stemming from Hardware Remains
Added to the problem of polluting the environment, the e-waste problem is persistent. This issue occurs because blockchain cryptocurrency miners wish to maximize the potential of the most efficient hardware and generate as much crypto as possible. However, this specialized hardware loses functionality within 1.5 years of usage and it cannot be recycled or re-programmed further. Therefore, the network of bitcoin is responsible for creating 11.5 kilotons of e-waste annually.
Most importantly, with 100–45 J/GH CPUs replacing the 0.1–25 GH/s CPUs, though the efficiency increases; the e-waste generated rises too.
After looking through the environmental hazards that Bitcoin poses, let us understand how sustainability and the bitcoin business can work in a synergistic manner. Or can they?
‘Greening’ the Crypto Market: Tracing the Sustainable Path
A sustainable initiative to make crypto green could include the usage of methane gas from the drilling of fossil fuel, and the setting up of plants in wind-power abundant areas for mining. Similarly, developers are searching for innovative ways to reduce energy costs — which will replace PoW with PoS (proof-of-stake) method. PoS authorizes the validity transactions and operation of the crypto network based on how much cryptocurrency a validator has “stalked” (decided to not sell or trade), thereby cutting down on the extensive usage of computer power as required in PoW. Similar methods of energy-efficient validation, including proof of elapsed time, proof of history, proof of capacity, and proof of burn are also being developed.
The Crypto Climate Accord and the Bitcoin Mining Council are forerunners of sustainable initiatives — whereby they are developing innovative and energy-efficient crypto transactions. For instance, running all blockchain mining exclusively on renewable energy is the ultimate goal of the Crypto Climate Accord by 2025.
These measures are theoretically excellent, but can they be implemented in real-time? From the financial aspect, these ventures require a high upfront investment. Moreover, considering the instability of the bitcoin market and its uncertain future — would many be ready to take the plunge into such a volatile endeavor?
However, if we were to ideally invest in bitcoins and grow its market, what would be the ideal way to strive forward for both cryptocurrency and the environment?
Striving Ahead with Sustainable Cryptocurrency — Fulfilling the carbon goals
Despite the environmentally taxing nature of the cryptocurrencies, the UN believes that “cryptocurrencies and the technology that powers them (Blockchain) can play an important role in sustainable development, and actually improving our stewardship of the environment.”
Hope lies with a new generation of environmentally conscious young programmers — who undertake green crypto mining operations, so as to produce cleaner, greener cryptocurrencies like Cardano (ADA), Solana (SOL), Tezos (XTZ), etc.
Moreover, bitcoin mining in the U.S. being more than 50 percent powered by renewables brings forth a revolutionary green culture in cryptocurrency. Furthermore, India levying 30 percent tax on cryptocurrencies, China banning the usage of conventional computer systems for mining and Kazakhstan introducing 22 percent extra taxes for crypto miners, in 2022 — only goes to show that though the crypto market promises high-yielding returns in a short period of time, it cannot be reaped at the cost of the environment.
