If you are recycling, choosing reusable or sustainable products, and you’ve already changed your driving habits, it probably means you’re environmentally conscious. However, if you use cryptocurrency, you might want to start questioning your “eco-friendliness,” as more reports are informing crypto-enthusiasts about digital assets’ potential harm to the environment.

The high-powered mining process creates digital assets. Computer systems work together to solve problems and build blocks. It’s an electricity-intensive digital activity that burns a considerable amount of electricity, not to mention the energy-consuming transactions.

According to an article by academics Liana Badea and Mariana Claudia Mungiu-Pupăzan, cryptocurrency production harms the environment in two ways:

• Power consumption of computers: networking, computing and cooling
• Disposal of electronic waste. After 1.5 years, the mining equipment that was used for its production is worn out and becomes obsolete.

However, technology is constantly evolving at an incredible pace, which means that we need more energy to maintain the technology’s performance.

Sources claim that Bitcoin is the industry with more renewable energy. It’s considered clean and doesn’t produce greenhouse gas emissions. Companies that heat greenhouses with heating from Bitcoin mining (also known as Genesis mining) are found in some countries, such as Sweden.

“Bitcoin is a digital asset, minted from energy. It’s digitally stored energy. This is what gives it its worth. Bitcoin’s electricity consumption is not a fault – it’s a feature,”
Dominic Frisby, Money Week

Comparison of Cryptocurrency and Other Industries

DailyCoin was able to interview Fred Thiel (CEO of Marathon Digital Holdings), one of the most important Bitcoin mining operations in North America, which is operating at relatively low energy costs. Marathon Digital Holdings aims to become 100% carbon neutral by the end 2022.

DailyCoin also spoke to Alex de Vries (founder of Digiconomist), about the effects of cryptocurrency on the environment.

In the report “Bitcoin Net Zero,” Ross Stevens and Nic Carter made a chart that compares the energy consumption of Bitcoin mining with other industries. The report states that in 2020 aviation transport consumed 4,030 TWh. This is more than 70 times the energy used by Bitcoin. Air conditioners and electric fans used 2,000 TWh to cool the air, while Bitcoin uses 62 TWh.

“Today we are at 49 TWh on an annualized basis. So we’ve actually seen a decline in energy use in the past year. This is due in part to the ban on Chinese crypto mining. There, energy production for Bitcoin was predominantly coal-based, and if this was shut off and replaced with mostly renewable energy like in North America, then you would see the carbon footprint drop dramatically,”
Thiel shared his thoughts with DailyCoin.

Carbon emissions of Bitcoin (33 MtCO2) in 2020 also ranked low on the chart compared to major mined products: aluminum’s carbon emissions amounted to 1,084 MtCO2, gold’s amounted to 101 MtCO2, and zinc’s amounted to 47 MtCO2.

However, there’s an opposing view of how the consumed energy by Bitcoin actually compares to other pollutants:

“Bitcoin is responsible for around 0.25% of global CO2 emissions, which obviously means many other industries are still bigger (e.g. Around 10% of global CO2 emissions is attributed to fashion. Of course, there is a relative aspect. Everybody wears clothing. Bitcoin is capable of handling 7 transactions per second, so even if people wanted to use it they couldn’t. An average Bitcoin transaction takes up to 80 T-shirts. In that sense there’s nothing less energy-efficient than Bitcoin,”
de Vries explained.

Bitcoin is moving towards being more environmentally friendly

Thiel stated that Bitcoin miners always seek the lowest price for electricity. If you look at the US in the context of renewable energy, there are times of the day when there’s too much electricity made. Electricity has to be used when it’s made because the only way to store it is in batteries, but there aren’t any batteries that are big enough to store the electricity of a nuclear power plant or a solar or wind energy producer.

When there’s excess electricity during the day that can’t be purchased by somebody, it’s given away for free. There’s a time of day when Bitcoin mining uses this electricity that otherwise would be wasted; those generators are renewable power plants (such as wind and solar energy).

“One of the things that Marathon Digital Holdings is doing, we’re working very closely with power providers in the US who generate renewable energy to develop a business model with them, where we could absorb the excess energy that they produce. So when there’s a surplus of energy, we take it, turn it into Bitcoin, and the providers can earn extra money from the energy to build even more renewable energy.

Bitcoin mining gives a reason for renewable energy providers to put in place more renewable energy generating resources,”
DailyCoin received an interview from Marathon Digital Holdings’ CEO.

Alex de Vries (an independent researcher) argued that cryptocurrency is worth the energy they consume.

“I don’t think we can ever accept a system that needs to waste energy by design to function (not while we are facing a climate emergency) – even more so given the scalability issues these systems are still facing – but I also think this is a fixable aspect. Many cryptocurrencies are already running environmentally friendly alternatives – so that makes it much easier to deliver a lot more value for the energy spent.”

Solutions to Minimize Cryptocurrency’s Environmental Impact

De Vries said that the single best way to tackle the environmental impact is by replacing the proof-of-work algorithm, which is what’s driving the high energy consumption numbers we find in Bitcoin and . Ethereum plans to switch to proof of-stake. It would mean that no specialized equipment is required. The proof-of-stake would decrease energy consumption by 99.95% while maintaining other functionality.

Thiel said that Ethereum’s future is centered on centralized models. That would mean there’s a central authority who can change the value of what’s in your Ethereum wallet, just by simply deciding to do that. So it’s a very simplified difference between proof-of-stake and proof-of-work, but it comes down to security. If you’re going to use digital currency for settling transactions, you want to make sure that the currency can’t be manipulated by the government.

Flipside

• There’s a lot of controversy around the energy consumption used for cryptocurrency.
• To provide security for the network, crypto mining must be very energy-intensive.

What are the reasons to care?

You should know the impact that cryptocurrency has on the world. Being innovative often implies being more environmentally-friendly, which is why cryptocurrency has been slowly moving toward sustainability.

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