Crypto’s Climate Impact – Cryptocurrencies are taking the world by storm, but their environmental impact is a growing concern. Is crypto bad for the planet, or can it be a force for good?
In this blog post, we will explore the complex relationship between crypto and climate change.
We will look at the energy-intensive mining process, the potential for renewable energy solutions. And then, the role that governments and businesses can play in reducing crypto’s environmental impact.
So, come on a journey with us as we explore crypto’s impact on climate change.
Table of contents
- Crypto’s Climate Impact
- Crypto’s Climate Impact – Proof-of-Work Mining
- Crypto’s Climate Impact – Cryptocurrency Energy Consumption
- Cryptocurrencies are bad for the environment?
- Cryptocurrency Mining
- Cryptocurrency has a huge Negative Impact on Climate Change.
- Environmental Impacts of Cryptocurrency Mining
- Climate Change
- Countries with the Largest Impact
- Could Cryptocurrency Mining Use Less Energy?
- What Factors Reduce Crypto’s Impact on Climate?
- What You Can Do to Reduce Crypto’s Impact on Climate ?
- How much of Crypto is Renewable?
- Crypto’s Carbon Emissions are not over yet.
- Developments to reduce Crypto’s Impact on Climate.
Crypto’s Climate Impact
Cryptocurrencies have been a rage for few years. But with their rising popularity comes a growing concern about their environmental impact.
The problem is only getting worse as cryptocurrencies become more popular. In 2021, the Cambridge Bitcoin Electricity Consumption index estimated that Bitcoin’s annual energy consumption was equivalent to that of a small country like Sweden.
And then, with the rise of new cryptocurrencies and the growing adoption of existing ones, it’s likely that crypto’s environmental impact will continue to grow in the coming years.
Crypto’s Climate Impact – Proof-of-Work Mining
This process is by which most cryptocurrencies are created, is incredibly energy-intensive. In fact, Bitcoin alone consumes more electricity than the entire country of Argentina.
This energy consumption comes at a cost to the planet, as it often relies on fossil fuels to generate the electricity needed for mining.
This can contribute to climate change, air pollution, and other environmental problems.
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Crypto’s Climate Impact – Cryptocurrency Energy Consumption
There is no direct way to calculate how much energy is used for Bitcoin or for other cryptocurrency mining. But the figure can be estimated from the network ‘s hashrate and the consumption by commercially – available mining rigs.
For example, the Cambridge Bitcoin Electricity Consumption Index estimates that Bitcoin, the most widely-mined crypto network, used an estimated 85 Terawatt-hours (TWh) of electricity (0.38% of global electricity use).
And about 218 TWh of energy (0.13% of global energy production ) at the point of production more than Belgium and Finland, using the latest country energy estimates from 2019.
More than 20,000 different cryptocurrencies and over 500 exchanges exist worldwide.
None of the cryptocurrency energy use reports calculations account for the energy expended to develop new coins or administer services for them.
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Cryptocurrencies are bad for the environment?
at least, that’s what most people online seem to believe. Pro-crypto posts on social media are often flooded with angry comments about the industry’s outsized contribution to greenhouse gas emissions.
Studies estimate that Bitcoin mining, the process that safeguards the Bitcoin network, uses more power globally per year than most countries, including the Philippines and Venezuela.
On the other side, members of the crypto community argue that crypto mining is actually good for the environment in several crucial ways.
They say that it offers a new, energy-hungry market that will encourage renewable projects. In the long run, they say, crypto will revolutionize the energy grid, and soak up excess energy that would have been otherwise wasted.
As lobbyists have volleyed arguments on both sides. A blow was dealt to crypto mining’s hopes for rapid expansion in the U.S. on June 30 when New York officials denied the air permits of Greenidge Generation.
A Bitcoin mining operation, citing “substantial greenhouse gas (GHG) emissions associated with the project.” The decision could set a precedent for how local jurisdictions across the country approach a hotly contested topic.
So which side is correct?
Chiefly, the amount of energy consumed by cryptocurrency mining will likely vary over time, assuming that prices and user adoption continue to vary.
Crypto mining is a competitive process as the value of the block reward increases, the incentives to start mining also go up.
Higher cryptocurrency mining prices mean more energy being consumed by crypto networks.
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Cryptocurrency has a huge Negative Impact on Climate Change.
There has been a lot of buzz about cryptos, a sort of private -sector digital version of money that is protected from theft by cryptography and counted through blockchain technology.
It creates a multitude of digital ledgers on computers scattered far and wide.
In addition, people buy things with crypto and it is bought and sold by investors.
But scientists and others worry that Bitcoin and other cryptos might pose a danger to the planet.
That’s because their blockchains require computers all over the planet to solve complex equations in order to verify transactions.
That practice, called mining can be lucrative , because the people who do it earn Bitcoins as a reward.
The problem, critics say, is that all those calculations needed to solve the equations for mining cumulatively consume large amounts of electricity.
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Environmental Impacts of Cryptocurrency Mining
Calculating the carbon footprint of cryptocurrency is complicated. Although fossil fuels are the predominant energy source in most countries where cryptocurrency is mined, miners must seek out the most inexpensive energy resources to remain profitable.
Digiconomist estimates that the Bitcoin network is responsible for about 73 million tons of carbon dioxide per year equal to the amounts generated by Turkmenistan.
Based on data through September 2022, Ethereum produced an estimated 35.4 million tons of carbon dioxide emissions before dropping to 0.01 million tons. Following its transition to proof of work.
It is quite difficult to determine how much Crypto’s electricity is by burning coal and gas, whose emissions contribute to climate change.
But since nearly two-thirds of the world’s total electricity is by plants that use fossil fuels,
it is not hard to imagine how some cryptocurrencies increasingly could contribute to climate change.
Countries with the Largest Impact
Researchers at University of Cambridge report that most Bitcoin mining occurs in the U.S., China, and Kazakhstan.
According to the Center for Strategic and International Studies, about 76% of the energy consumed in China is from coal and crude-oil. China’s percent of the global hash rate is 21%.
About 38% of mining takes place in the U.S. The U.S. gets most of its electricity by burning fossil fuels, per 2019 data from the EIA.
Kazakhstan accounts for 13% of the world’s Bitcoin mining and mainly uses fossil fuels.
As a result, these 3 countries heavily depend on fossil fuels. And they are responsible for around 72% of the world’s Bitcoin mining.
Could Cryptocurrency Mining Use Less Energy?
Crypto mining also generates significant electronic waste, as mining hardware quickly becomes obsolete.
This is especially true for Application specific Integrated Circuit miners, which are specialized machines designed for mining the most popular cryptocurrencies.
According to Digiconomist, the Bitcoin network generates approximately 38 thousand tons of electronic waste annually.
The power plants necessary for crypto mining can also have an impact on the surrounding ecosystem.
According to Colombia Climate School, the Greenidge Generation plant in Dresden, New York, draws millions of gallons of water to cool itself while running.
And it discharges some of that water back into Lake Seneca at 30-50 degrees Fahrenheit above normal temperature, which endangers the wildlife.
What Factors Reduce Crypto’s Impact on Climate?
There are a few things that address the growing climate impact of cryptocurrencies.
- Switch to more energy-efficient mining methods – Some newer cryptocurrencies are using more energy-efficient mining algorithms, such as Proof-of-Stake. This could help to reduce the overall energy consumption of the cryptocurrency industry.
- Use renewable energy to power mining operations – Miners can switch to renewable energy sources, such as solar and wind power, to reduce their reliance on fossil fuels.
- Tax cryptocurrency mining operations – Governments around the world impose taxes on cryptocurrency mining operations to offset their environmental impact.
- Reduce the energy consumption of cryptocurrency transactions – Some cryptocurrency developers are working on ways to reduce the energy consumption of crypto transactions. This is by optimizing the code.
- Or using more energy efficient hardware.
What You Can Do to Reduce Crypto’s Impact on Climate?
If you are concerned about the impact of cryptocurrencies on climate ,there are few things you can do.
- First, you can support cryptocurrencies that use more energy-efficient mining methods.
- Second, Invest in renewable energy companies that are helping to power mining operations.
- Third, you can urge your government to tax crypto mining operations and use the revenue to fund climate change mitigation efforts.
- Additionally, you can reduce your own crypto usage, if you don’t need to use cryptocurrencies, try to avoid them.
Efforts for more green crypto include using methane gas from fossil fuel drilling that usually Burnes off. And setting up plants in areas where wind power is abundant, like West Texas.
These are good ideas in theory, but whenever the price of Bitcoin crashes, it may not be financially feasible to implement these projects or others like them.
How much of Crypto is Renewable?
There is currently not enough official information available to determine how much of the energy consumed by cryptocurrencies is from renewable sources.
Some new cryptos strive to consume less energy by employing alternative methods such as proof of stake.
In which it allows a miner to validate transactions on the blockchain based upon the number of coins that the miner holds, instead of by solving an equation.
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Crypto’s Carbon Emissions are not over yet.
At present for mos of us, cryptos seems like nothing more than a fad. After the FTX bankruptcy and broader crypto crash last year, basically all of the celebrities who were promoting crypto have gone silent.
The wild west days of the industry may be over. Recently, the head of the SEC warned crypto firms to “do their work within the bounds of the law” or face enforcement actions.
Lots of people lost money in the crash, but from the planet’s perspective , the industry’s downfall is good news.
The computing power fueling the crypto boom was so substantial that it was causing substantial greenhouse-gas.
And yet crypto’s greenhouse-gas emissions are still shockingly high.
Developments to reduce Crypto’s Impact on Climate.
Developers are instead looking to the design of future cryptos to reduce energy cost, mostly by moving to new systems of validation that are not proof of work.
One example that has gained popularity is Proof-of-Stake (PoS) system. Which relies on how much of the a certain cryptocurrency a user has agreed to stake or hold and not sell.
Each person who agrees to stake crypto, becomes a validator who can validate the authenticity of transactions on the blockchain. In the same way a miner would.
Once a new block forms, validators are rewarded with coins they stake. This uses reduced computing power compared to the race to crunch through equations that comes with mining in a PoW system.
Initiatives like the Bitcoin Mining Council and the Crypto Climate Accord are also developing new ways to make crypto mining and transactions more energy efficient.
Especially, Accord has a stated goal of running all blockchains on entirely renewable energy by 2025.
Some mining operations currently run on renewable energy but it’s hard to pin down an exact percentage.
And then, the issues of e-waste and other environmental consequences is there.
Cryptocurrencies have the potential to revolutionize the way we use money and make transactions.
But we need to find ways to make them more sustainable before they can truly reach their full potential.
By working together, we can reduce the climate impact pf cryptos and ensure that they have a positive impact on the world.
Cryptocurrency mining accounts for 140 million metric tons of CO2 per year released into the atmosphere, or 0.3% of all global greenhouse gas emissions.
Bitcoin by far the largest market share estimates that at its current rate of “mining” new coins, Bitcoin will release about 62 megatons of “carbon-dioxide equivalent each year. About as much as the entire country of Serbia emitted in 2019.
The creation and administration of carbon credits is one way that blockchain technology can help fight climate change. A tradable permit called a “carbon credit” permits the holder to emit a certain amount of greenhouse, such as carbon dioxide.
Hedera Hashgraph (HNAR).It is working in collaboration with the Crypto Climate Accord. It is fully carbon neutral and has pledged to go further. Hedera is set on going carbon negative through carbon offsetting and credit programs.
The eco currency is intended to serve as a decentralized alternative to fiat currencies either to fix their monetary policies . And then, admit exchange rate volatility, or attempt to limit volatility and achieve dollar through various policies.