The production of cryptocurrency is often considered a negative impact on the environment, but technology is evolving to help mitigate those problems. Jess Summerhill, the Chief Technology Officer of Dnar, a company working to make cryptocurrency accessible to West Africans, recently envisioned a new way to mine cryptocurrencies. With over a decade of experience in the tech industry, Jess is an avid science fiction fan and believes that future mining methods will be more environmentally friendly.
Proof of stake uses as little as 0.01% of the energy consumed in the mining process
The interest in cryptocurrencies has grown along with their carbon footprint. A recent study by Joule estimated that bitcoin’s energy consumption in 2018 was responsible for the emission of 22 million metric tons of carbon dioxide, which is equivalent to 10 percent of the world’s annual railway emissions. While these figures are not definitive, they do show the scale of cryptocurrency mining. Consequently, the questions, “How enviromentally friendly is crypto mining?” are increasingly being asked by miners.
One of the most important factors for cryptocurrency sustainability is energy use. Not only does the currency being mined need the most energy, but it’s also important to consider the source of that power. Is the operation powered by renewable energy? Is the equipment used physically or electronically? How much electricity is generated during each operation? Does the mining process require energy from non-renewable sources? While these issues are valid concerns, it’s important to note that these factors don’t apply to all digital currencies.
The process of creating and verifying new coins in the blockchain relies on the process known as crypto mining. Crypto mining uses powerful computers to process transactions. The mathematical problems involved require quintillions of numerical guesses per second, and crypto miners receive new coins for each transaction. Clearly, cryptocurrency mining is not as environmentally friendly as it sounds. But it is an essential part of the cryptocurrency ecosystem.
Despite its environmental benefits, crypto mining is still not environmentally friendly. Bitcoin, for example, uses the proof-of-stake protocol, which requires miners to stake a certain amount of their coins to earn a reward. It requires a large amount of mass faith and collective buy-in to make the cryptocurrency more viable as a universal form of commerce. The proof-of-stake system is more environmentally friendly, but it still produces a carbon footprint.
Bitcoin uses much less energy than traditional financial networks. IOTA uses significantly less energy than Bitcoin. By using Atomic Transactions, each transaction is smaller than one hundred bytes. IOTA released figures in May 2021 showing a reduction of 33-95% in energy usage. Although the study does have a few limitations, the data is indicative of what happens when a miner uses crypto mining. So, how enviromentally friendly is crypto mining?
Bitcoin’s power consumption emits 22 million metric tons of carbon dioxide
There are some concerns about the carbon footprint of Bitcoin mining. With Bitcoin’s price climbing to nearly $42,000 in recent months, many consumers are concerned that their purchases are contributing to the problem. But the crypto market isn’t purely bad – it is also beneficial. Its growing popularity has led to an increase in demand for energy-efficient mining solutions. A recent study by the Joule group found that Bitcoin mining was responsible for an estimated 22 million tons of CO2 in 2018. That’s almost 10 percent of the emissions from the entire railway sector.
According to the World Resources Institute, more than 70% of bitcoin mining takes place in China, a country that is already battling climate change. This could undermine China’s efforts to reduce carbon emissions. Another major bitcoin-mining hub is Russia, where big operations in Siberia prevent the country from overheating. Meanwhile, Iran offers cheap, subsidized electricity and is an ideal location for mining. But is mining really that environmentally friendly?
Some Bitcoin operations are already using zero-carbon energy. Others shift seasonally to use cheap hydropower during summer and coal during winter. Some miners even chase after cheap hydro in Canada and the Pacific Northwest to cut costs. However, the world desperately needs to do more to curb carbon emissions. Bitcoin mining is a huge contributor to these emissions. In order to make a positive impact on the environment, companies need to be environmentally responsible and reduce their carbon footprint.
The Bitcoin community is divided on the issue of clean energy. Some developers have proposed building new cryptocurrencies based on proof-of-stake, which uses 0.01 percent of the energy needed for mining. However, this is unlikely to win out against the backlash of the cryptocurrency community. In the meantime, some companies are continuing to mine Bitcoin. This makes it difficult to answer the question “How environmentally friendly is Bitcoin mining?”
While many people have been skeptical about the benefits of green energy for bitcoin mining, it is still a growing market. With the price of Bitcoin exceeding $42,000 per unit, mining Bitcoin is an increasingly popular endeavor. Mining Bitcoin requires a significant amount of energy – enough to power a US household for 78 days. Bitcoin mining also causes significant pollution from power plants. And because the energy used by the Bitcoin network is used in the process of calculating the bitcoin price, the environment is being affected in an unintended way.
China shutting down its doors to crypto mining
Chinese government plans to shut down cryptocurrency mining projects in April, focusing on reducing energy usage. While Beijing has long supported the development of bitcoin’s underlying blockchain technology, it has also cracked down on cryptocurrency exchanges. President Xi Jinping’s stated goal of carbon neutrality by 2060 means China must reduce its carbon footprint. This move may put some Chinese miners out of business, but it’s also a good time for overseas mining companies to get ahead.
The crackdown in Sichuan province appears to be limited to Ya’an, an area that is known for its hydro resources. In Ya’an, crypto miners have enjoyed cheap electricity during the rainy season. The crackdown in Ya’an follows a crackdown on hydro-based mining in Yunnan province. Other provinces have also ordered crypto mining operations to shut down. Whether or not these crypto mining operations will stay in business is unclear.
The government is also targeting Ethereum mining. This move is likely to cause a migration of Chinese miners to other countries, and will ultimately put a halt to crypto mining in China. This move could mean a price collapse for mining machines and mining equipment in the short term. As a result, many Chinese miners will dump their processing equipment. Moreover, the market’s appetite for an oversupply of processing equipment will be lukewarm.
The crackdown will have a ripple effect throughout the crypto industry, but there is good news. Many investors aren’t scared off. In fact, many believe the crackdown will lead to mining relocating elsewhere. Indeed, Silicon Valley venture capital firm Andreessen Horowitz recently launched a $2 billion cryptocurrency fund. If China does indeed shut down its doors to crypto mining, it will be a huge loss for Chinese investors and the entire industry.
The clampdown has already prompted a massive wave of activity in the crypto industry. In response, 30 Chinese companies have either issued statements or updated their policies, indicating varying degrees of restriction for Chinese users. One of the largest exchanges, Binance, is headquartered in China. Many of these companies may be able to survive, but the broader impact of the crackdown will be felt for decades to come.
Impact of crypto mining on climate change
Cryptocurrency mining is an environmentally-harmful activity. It uses massive amounts of power to process the transactions. Because of the high energy costs, many countries have banned crypto mining. The United States is the largest source of crypto mining activity, and in January 2022 Congress began active investigations into the impact of this industry on the environment. Its use of energy has led to concerns about climate change and global warming. But how much of an impact is it actually having?
The White House is examining the impact of cryptocurrency mining on climate change. The administration has commissioned a report assessing the environmental costs and benefits of crypto mining. The report will include input from the State, Commerce, and Labor departments, as well as several offices in the White House. It is estimated that 40 million Americans now use cryptocurrencies, and the loosely regulated market reached $3 trillion last November, though it is now worth less than $2 trillion. Biden is working with President Obama and the council of economic advisers chair Cecilia Rouse to understand the environmental risks of cryptocurrency mining.
Crypto mines use energy that originates from fossil fuels. The energy used for these mines is equivalent to that used by Thailand’s entire population. This means that Bitcoin has a carbon footprint almost equivalent to that of gold mining. Each bitcoin transaction generates ninety megatons of CO2, the equivalent of all the energy used by a US household for two months. While some of these emissions may be attributed to the mining of cryptocurrencies, others have argued that it is an entirely separate topic.
While climate activists are generally supportive of decentralized currencies, Bitcoin mining has a negative environmental impact. Bitcoin mining has prompted China to crackdowns on the industry, claiming that it undermines the environmental goals of President Xi Jinping. China has even expelled the majority of Bitcoin miners to neighboring countries to reduce its carbon footprint. Earlier this year, Bank of America estimated that the global Bitcoin mining industry produces more carbon emissions than American airlines. Meanwhile, MoneySuperMarket estimated that the average Bitcoin transaction consumes about a thousand kilowatt-hours of electricity.
