Cryptocurrencies may seem to be futuristic, but that doesn’t mean they’re green. Work validated cryptocurrencies, like Bitcoin, have high energy requirements and produce electronic waste. So, are Cryptocurrencies bad for the environment? The short answer is yes.
The high (Energy) Cost of Cryptocurrency
According to The Harvard Business Review, Bitcoin alone uses around 110 Terawatt Hours per year. This is as much per year as Sweden and 0.5% of the world’s energy usage. It takes energy to both mine crypto and to use it in transactions. The mining of crypto specifically requires a computer to solve a complicated math problem unique to each unit of cryptocurrency.
Cryptocurrencies’ energy cost will increase as their value increases. This is due to the increasingly complex equations that will be needed to mine it. To use Bitcoin as an example, it took a single computer a few seconds in 2009 according to the New York Times. Today, it takes a warehouse full of specialized computers. These computers take a lot of energy to operate.
Mining isn’t the only energy intensive step to using cryptocurrency. The transactions themselves take up a lot of juice. Each Bitcoin transaction uses 1,173 Kilowatt hours of electricity. This may be a drop in the bucket compared to how much it takes to mine it, but the transactions add up and contribute to the high energy cost of cryptocurrencies, like Bitcoin.
Keeping the Plants Running
The result of crypto having such a high energy requirement is that many Bitcoin miners are taking over old and underused power plants. This is keeping these plants running without even providing power to the grid. These old plants are less efficient than newer plants and produce more greenhouse gasses.
Bitcoin mining and use produces 57 million tons of carbon dioxide in the air every year. All that for a decentralized currency that barely operates as a currency. Even ignoring the likelihood that any given cryptocurrency is a scam, this seems to be a great cost to society that outweighs any benefit.
According to Yahoo Finance, Bitcoin mining alone produces 30,700 tones on waste every year. That is more than an iPhone per transaction. This waste includes old chips, computers, and other equipment. Computer chips that mine crypto only last, on average, about 1.3 years before they’re replaced.
The reason that chips are cycled through so quickly has to do with how cryptocurrencies, like Bitcoin, are mined. Bitcoin uses a system of increasingly difficulty to for each Bitcoin mined in order to keep its value. This means that it takes more computing power to create a new Bitcoin each time. The increase in computing power encourages Bitcoin miners to replace their chips with newer and better ones as often as possible.
This demand for chips is also one of the causes for the global chip shortage. The shortage is increasing the cost of many green technologies, like energy efficient cars and other devices. This keeps people using their old and not as efficient vehicles longer.
Are There Any Solutions?
One possible way to mitigate the environmental impact of cryptocurrency is to switch from using proof-of-work to proof-of-stake cryptocurrencies. Proof-of-work (or work validated) cryptocurrencies work by preforming increasingly difficult calculations like we described earlier. Bitcoin is a proof-of-work cryptocurrency. Proof-of-stake cryptocurrencies work by limiting the number of new coins one can mine to the percentage that they already have.
It’s unlikely that this switch will happen with bigger currencies, like Bitcoin, because it would require all miners to update at the same time to avoid a split. Basically, this means that the cryptocurrency could be divided into two separate currencies. This already happened with Bitcoin Cash and caused both currencies to lose value.
The simpler solution would be to stop using cryptocurrencies entirely, but due to their value, this seems unlikely. As of today, one Bitcoin is worth over $40,000. Investors and speculators will invest more into crypto as their value increases.
Cryptocurrencies, like Bitcoin, are terrible for the environment. They increase energy use, produce vast amounts of electronic waste, and even keeps old power plants running. Though there are ways to mitigate the environmental impact of cryptocurrency, they probably won’t implement them. It seems unlikely that this will change in the future.