Cryptocurrency has reached a tipping point. From viral Super Bowl ads to a $700 million naming rights purchase for the most iconic sports venue in Los Angeles, it has graduated from obscure trend to mainstream legal tender. Despite not being a legal tender in any nation except El Salvador, digitally mined virtual currencies like Bitcoin, Ethereum, Tether, BNB and others are stirring a global craze among people eager to create new wealth and transact currencies created outside of existing banking systems for governments.
Many investors have turned small crypto investments into massive crypto returns. The price of Bitcoin tokens, for example, has risen thirtyfold in the past five years. However, this rapid growth is coming at a cost to the planet.
Computing systems that transact and mine cryptocurrencies consume lots of energy – more than entire nations, according to The New York Times.
“The Cambridge Centre for Alternative Finance calculates that Bitcoin mining, on the whole, consumes slightly more energy than gold mining, which is a fair comparison, since both Bitcoin tokens and gold are pitched as alternatives to fiat currencies such as the U.S. dollar,” economics writer Peter Coy wrote in an April 2022 New York Times Opinion piece.
“Bitcoin mining consumes more electricity than Norway but slightly less than Egypt…and accounts for 0.62 percent of the world’s total electricity consumption,” Coy wrote, citing data from the Cambridge Center report.
Coy pointed to the European Parliament’s move toward insisting that all cryptocurrencies meet environmental sustainability standards, showing that regulators are jumping into the fray. And leading technologies are putting more attention on the topic as they see opportunities for growth and meaningful innovation.
“A single ledger in Bitcoin consumes enough energy to power your house for almost a day,” Intel CEO Pat Gelsinger said in an interview with Bloomberg News. “That’s a climate crisis … If we produce the tech that consumes that much energy – wow, that’s not OK.”
Although it takes energy to transact digital currencies, the biggest source of crypto’s carbon footprint is bitcoin mining. Bitcoin alone was on pace to burn roughly 76 billion kWh in 2021, nearly triple the consumption of cryptocurrency rival Ethereum, and over 100 times that of Litecoin, according to an article by Fortune magazine.
Citing Global Impact of Crypto Trading, a report by financial education site Forex Suggest, the article stated that Bitcoin emits some 57 million tons of CO2 annually, more than double Ethereum’s footprint. Bitcoin deploys an incredible 707 kWh of electricity per transaction, 11 times as much as Ethereum, and emits 1,061 pounds of CO2 every time someone taps the app to buy or send a fraction. Ethereum emits one-tenth of that amount of carbon waste for each purchase or transfer.
Because digital currencies are becoming more common and popular every day – some countries even have their own digital currencies that are backed by central banks. This is concerning for anyone focused on climate change and sustainability. And that’s why Intel and other companies believe new high-tech innovations can help cryptocurrency miners better manage, if not lower, their environmental impact. There are other clever, gamified schemes in the works, and together all of these efforts in aggregate could bring some relief.
What is Bitcoin Mining?
To understand why bitcoin mining consumes so much electricity, one must first understand how it works.
Although the technology behind it is complex, the concept itself is quite simple: As with gold, silver and other precious commodities, there is a limited supply of bitcoin available. That’s what gives it value. The currency itself is governed by a decentralized network of users whose computers collectively process and manage transactions. No single person or entity owns it. All bitcoin transactions are therefore openly accounted for in a blockchain, which is an immutable public ledger that anyone can see and no one can change.
In exchange for managing this massive computerized ledger, participants are allowed to “mine” new bitcoins from the network, which they do by solving extremely complicated math problems that require sophisticated computers that consume significant electricity.
Because you’re rewarded for running as many machines as possible – the more computers one has solving math problems, the more likely they are to earn bitcoins – the system incentivizes users to consume resources rather than conserve them.
When bitcoin was created in 2009, users could mine a single bitcoin with a basic computer in their living room. Bitcoin mining has become so competitive, however, that it now requires a room full of specialized machines to do it. Bitcoin miners, which are now more likely to be companies instead of individuals, are therefore using more energy today than they were a decade ago.
“Bitcoin mining is essentially waste by design,” Dutch economist and crypto researcher Alex de Vries, founder of Digiconomist, told NBC News in a 2021 interview.
“It’s a system where participants are forced to waste resources to provide some level of security on the network. The more value bitcoin has, the more money it’s worth, the more we spend on resources.”
It’s a vicious chain of events: As bitcoin rises in value, competition amongst miners intensifies, which leads to more consumption of resources and a larger bitcoin carbon footprint.
Currently, bitcoin mining generates electronic waste at a rate of nearly 31,000 tons per year, according to researchers Alex de Vries and Christian Stoll.
“The rapid passage of millions of devices used for cryptocurrency mining may disrupt the global supply chain for other electronic devices,” the researchers told the BBC.
Bitcoin mining is so energy-intensive that some mining operations have partnered with struggling power plants that would have ceased operation without their support. One coal company even directly invested in bitcoin mining operations to manage variability on the grid.
Reducing Cryptocurrency’s Environmental Impact
Investment in crypto shows no signs of slowing, but innovative environmental solutions can ease the cryptocurrency carbon footprint.
To that end, environmentalists and tech innovators alike are working to develop green solutions that reduce bitcoin pollution and energy costs. The most promising among them are: creating new, more sustainable mining hardware; investing in renewable energy sources; and fundamentally shifting how bitcoin is mined.
1. New Mining Hardware
Gone are the days of mining at home. The only practical way to mine now is with an expensive piece of hardware: an application-specific integrated circuit (ASIC). Enterprise-level solutions are therefore essential.
“We are mindful that some blockchains require an enormous amount of computing power, which unfortunately translates to an immense amount of energy,” Raja Koduri, executive vice president in charge of Intel’s Accelerated Computing Systems and Graphics Group, explained in a blog post.
“Our customers are asking for scalable and sustainable solutions, which is why we are focusing our efforts on realizing the full potential of blockchain by developing the most energy-efficient computing technologies at scale.”
Although it initially was hesitant to enter the crypto world, in February 2022 Intel announced it was making an “energy-efficient” semiconductor designed especially for crypto mining. This customized chip will increase computational power by nearly 95%. By allowing them to get more processing power out of their machines, Intel hopes miners will be able to cut costs and reduce energy consumption.
2. Renewable Energy
Although experts argue over its viability – the world currently lacks the green infrastructure to support it – another way to tackle the cryptocurrency carbon footprint could be to utilize renewable energy sources like wind, solar or hydropower.
Currently, Bitcoin’s use of renewables ranges anywhere from about 40% to almost 75%, The New York Times reported.
“As far as we can tell, it’s mostly baseload fossil fuels that are still being used, but that varies seasonally, as well as country to country,” crypto researcher Benjamin A. Jones, an assistant professor in economics at the University of New Mexico, told the paper. “That’s why you get these wildly different estimates.”
Reducing cryptocurrency’s environmental impact through investment in renewable energy is possible, but would take major investment and realignment of current energy consumption.
Still, eco-conscious miners are advancing where they can. Some miners, for example, have partnered with oil drillers to power their mining operations with unwanted natural gas that the drillers would otherwise burn off. This benefits everyone: oil drillers, crypto miners and the environment. Unfortunately, neither the supply of natural gas nor the value of bitcoin is predictable, which makes it difficult to sustain such partnerships at scale.
3. Mining Makeover
Bitcoin mining by definition is energy consumptive. But what if crypto founders and miners changed how mining works?
Some minor cryptocurrencies have done just that by conceiving innovative ways to distribute coins. For example, the cryptocurrency SolarCoin distributes its currency as a reward to solar installations. Miners receive 1 Solarcoin for every megawatt-hour generated from solar technology. With other cryptocurrencies, like Reddcoin, coins are “minted” instead of “mined,” which means users are rewarded based on ownership instead of computing power.
There are dozens of more sustainable cryptocurrencies trying to establish a greener approach to crypto, but they haven’t yet been proven at scale, and there’s no financial incentive for cryptocurrencies like bitcoin to change their current system.
As with other energy-consumptive industries, changing the carbon footprint of cryptocurrency will require myriad changes, both small and large. Only with a concerted effort from investors, environmentalists and politicians will there be a substantive change in cryptocurrency’s environmental impact.
Jacob Gedetsis is a contributing writer. His work has appeared in The Kansas City Star, The Post Standard, and The Plain Dealer, among others. Find him on Twitter at @JacobGedetsis.
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