How green is cryptocurrency?

The сreation of bitcoin and other cryptocurrencies has revolutionized finance and, it seems, our entire lives. Crypto wallets, crypto exchanges – it isn’t easy to calculate and track the owner. Therefore, the formula “money does not smell” can be applied to this financial instrument more than to all others. However, its environmental impact has a very noticeable smell – waste.

Mining requires processing vast amounts of data and uses a lot of resources. Cryptocurrency farms work around the clock and devour energy. As of February 2022, the global Bitcoin network required 14.37 GW of electricity. The process of “ mining ” this cryptocurrency requires more electricity than the total consumption of the Netherlands, the Czech Republic or Chile. At the same time, about 23 million tons of carbon dioxide enter the atmosphere.

Most of the energy consumed comes from non-renewable sources – fossil fuels. Its burning leads to the emission of greenhouse gases and affects the planet’s climate. So let’s add here the cooling systems serving the mining centres themselves.

According to research, in 2018, every dollar created due to mining bitcoin in the US has resulted in damage to human health and the climate, estimated at 49 cents.

In the face of fierce competition, the owners of crypto farms often change their computers to new, more powerful ones. As a result, on average, the time a mining device becomes unprofitable is less than a year and a half.

Old computers go to waste. Every year, the Bitcoin network generates approximately 30,700 tons of electronic waste – 5 times more than the whole of Luxembourg.

Scientists have calculated that each bitcoin transaction “produces” approximately 135 grams of electronic waste (about the weight of an iPhone 12 mini). Most of them are not recycled and usually end up in landfills. E-waste contains large amounts of toxic materials in the air or groundwater. According to research by the World Health Organization, only 17% of obsolete computers have been appropriately recycled without harming the environment.

Among other things, the energy consumed for mining cryptocurrencies often reduces the stability of power grids. And the constant need for new computers may exacerbate the shortage of other devices that use computer chips.

Christina Cogdell, cultural historian: “The production of special computers and equipment for crypto farms requires a large amount of aluminium, copper, iron, silicon and other materials. It means that mining in the virtual space requires mining in the real world.”

Experts believe that the only way to the sustainable development of cryptocurrency is to replace the mining system. Now it is the so-called Proof-of-Work algorithm used by most cryptocurrencies. However, it is based on increasing the capacity of the equipment. An alternative method is Proof-of-Stake. It has no incentive to use power-hungry hardware because the odds of winning depend on how much money you have, not on computing power.

Some companies are looking for alternative energy sources for reuse. For example, they use the heat generated during the extraction of minerals or for the needs of agriculture.

The recently adopted Cryptocurrency Climate Agreement (CCA) outlined the goal of transferring all blockchains to renewable energy sources by 2030 and eliminating greenhouse gas emissions by 2040. More than 200 companies and individuals working in this industry have already supported the agreement.

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