Bitcoin, dogecoin, and Ethereum are some of the most recognized cryptocurrencies right now. People are clamoring to get their hands on them, but at what cost?
What’s the Big Deal With Cryptocurrency?
These cryptocurrencies run on a “proof-of-work” method, which means computers compete to complete a transaction so they can obtain a reward, such as a bitcoin, a dogecoin, or an Ether. Those with the fastest, most powerful computers have an edge. While these computers mean an increase in energy consumption, investment banks and established companies are still endorsing the use of cryptocurrencies. This is keeping their value relatively high, encouraging people to invest their time and money.
People like that cryptocurrencies are decentralized, meaning they aren’t associated with any governments or banks. This makes it easier for anyone to become a participant in the network. Plus, most cryptocurrencies have a limited supply, which means their value can’t be affected by inflation. And thanks to the nature of the currency, governments can’t easily tax or confiscate them. The icing on the cake: the fees are lower and the security is higher compared to other forms of online payments.
So why not use cryptocurrency? Not all of them are that bad for the environment, and some don’t even use mining, which is the main cause of the increased energy use. The problem is that the major ones can consume as much energy as entire countries. A well-known example is bitcoin, which has been reported by the BBC to annually use more energy than the whole of Argentina.
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Using Up Energy
When bitcoin began, an average computer could be used to mine it, which involves the computer solving complex algorithms in order to be awarded a bitcoin (almost like getting a gold star for finishing your math homework, except the star can buy you things). However, the more that is mined, the harder the algorithms are. This has led to the need for special computer equipment that demands a lot of electricity to keep the intense processing going.
There are proponents of bitcoin who insist that the mining often uses renewable energy. Yet the miners will go where electricity is cheapest, which often means they are powered by coal or other fossil fuels. Even if pollution and carbon footprints are taken out of consideration, mining cryptocurrency can still use up resources that other consumers need.
Using Up Hardware
The cryptocurrency energy consumption isn’t the only issue. It also has a huge effect on the environment through hardware and e-waste. A lot of the specialized hardware can’t be used for any other tasks, so once they become obsolete, they’re just fancy trash. The bitcoin network alone creates up to 12 thousand tons of electronic waste each year. It seems unlikely that renewable energy will be able to offset the energy consumption consequences, but even if it could, the cryptocurrency environmental impact would still be huge solely thanks to its e-waste.
Unfortunately, those reported 12,000 tons of e-waste just include the disposal of mining equipment. What else should be taken into consideration? The other equipment used in the mining facilities, such as cooling and transactions done by third parties that aren’t recorded on the bitcoin blockchain. The waste keeps adding up.
Comparing Bitcoin to Other Energy Users
To put it into perspective, consider that you could watch YouTube for 91,624 hours (which we do not recommend!) and that would have a similar carbon footprint to an average transaction of a single bitcoin. Or: an average bitcoin transaction uses the electrical energy equivalent to the amount an average U.S. household uses in 39.67 days. Or if it helps to compare it to another payment system: an average bitcoin transaction consumes 1,200.86 kWh of energy, while 100,000 VISA transactions only uses 148.63 kWh, according to Statista. That’s a ridiculously huge difference!
And remember, these stats are only based on bitcoin mining. Now think about all the other cryptocurrencies being mined out there, and you can see how much of a problem it’s become.
How Can We Improve?
Even if the whole bitcoin network was powered with renewable energy, the environmental impact of cryptocurrency wouldn’t be mitigated. As stated before, there’s still the physical waste to consider, plus all the other cryptocurrency networks. Yet there are always other paths we can take to get where we want to go.
If you want to get into cryptocurrency, find one that uses a “proof-of-stake” method such as Dash, Nxt, or Cardano. These use less energy than the “proof-of-work” process because a miner can only mine a percentage of transactions up to the percentage of their ownership stake – so if they own 5% of the coins, they should only be able to mine 5% of the blocks. Since this method doesn’t reward speed in being the first one to solve algorithms, it is much more energy efficient than currencies like bitcoin and Ethereum. Ethereum itself is planning to switch over to this method.
There are also people working on building more ethical cryptocurrencies, such as SEEDS. They aim to have all of the benefits of other cryptocurrencies, while putting more emphasis into improving the world in areas such as the climate crisis and world hunger. They also, of course, are much more energy-efficient than currencies like bitcoin, as they have no mining.
Some communities, from towns to whole countries, are placing greater restrictions on bitcoin miners so that they can’t come in and use up as much power. While the use of fossil fuels is a more obvious detriment to the environment, even the use of renewable energy such as hydropower can cause harm to the locals. For example, miners going to a town near Niagara Falls will find the price of electricity to be much lower. But once they begin to flock there and use up the town’s energy quota, the town then has to buy more power on the open market, drastically increasing their costs. In order to prevent cryptocurrency’s crazy consumption of their resources, some communities are blocking requests for power from mining operations, increasing electricity rates for miners, or completely shutting off power to large server farms.
While there are many benefits to cryptocurrencies, the global community needs to put the environment first and foremost. If our planet continues to be affected by an increase in fossil fuel consumption thanks to cryptocurrency mining, then none of the advantages of these currencies will matter. Using more renewable energy sources can only go so far when local communities are affected, and there’s still hardware and e-waste building up. Until we can make cryptocurrencies work as part of an efficient energy lifestyle, we probably shouldn’t be using them.