Investing in cryptocurrencies like Ethereum and Bitcoin has become the talk of the town among millennials, but it seems their future is bound to be at a loss, no matter the profit earned right now. Different parts of the world are under an aggressive debate regarding the environmental impact of cryptocurrencies, and it is alarming.
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Cryptocurrency Mining is Costly, Painstaking, and Seldom Beneficial
Producing cryptocurrencies is not a regular task as it requires special computers which solve complex mathematical problems. The electricity that these computers require is the biggest expense for cryptocurrency miners. As for us, it is using up the precious non-renewable and renewable resources which are already depleting.
Cryptocurrency is not the only industry to utilise enormous amounts of energy. For instance, the concrete industry uses more power than India does in a year. However, the pollution released from the energy used by both industries causes irrevocable damage to the environment.
The same school of thought influenced Elon Musk to take a one-eighty in his decision to accept Bitcoins as a payment to purchase Tesla vehicles. In his tweet, he rejected the idea of using crypto as a valid tender because of the hazardous amounts of emissions data mining and transactions produce.
But before we examine the bigger picture, let’s look at the basics that transform crypto-mining into a precarious problem.
Why Does Crypto Mining Use Exorbitant Electricity?
To understand the cryptocurrency’s electricity consumption, we have considered the example of Bitcoin.
Rewinding to the early days of Bitcoin, anybody could run the mining program on their laptop or PC. But the algorithm became strenuous with the influx of more people becoming interested in mining. The major reason is that the Bitcoin code aims at searching for a new block once every 10 minutes, on average. If there are more miners involved, there are chances that somebody would crack the right hash quicker, disrupting the 10-minute average goal. Imagine if millions or thousands of mining power got involved in the network. More the machinery there is, the greater the energy and power consumed.
Results of Cryptocurrency Mining
The adverse impact of cryptocurrency mining on the climate is severe and not something to be turned a blind eye. They include public health and environmental concerns and the release of toxic chemicals into the air. It also results in deteriorating air quality, leading to respiratory and cardiovascular diseases in the communities living by.
Another grave consequence is that it leads to a ridiculous amount of e-waste. E-waste results in irreversible harm to the local water bodies due to overheating and excessive water usage. Physical, electronic waste includes ASIC rigs, computers, graphic cards, etc.
Statistics show that the electricity consumed by cryptocurrency mining is even greater than the energy exhausted by many countries like Sweden, Malaysia, or Finland annually. On top of that, cryptocurrency transactions take up a lot of energy, an average of 1,700 kWh of electricity. This is almost twice the monthly consumption amount of an average U.S. home.
In most countries, the electricity to mine cryptocurrency is derived from fossil fuels. As the price of, let’s say, Bitcoin rises, so does the energy consumption. The rise in prices attracts more miners to join the network, offering more significant incentives.
Studies also claim that if Bitcoin continues to follow the adoption rate as other technologies, mining alone could emit carbon dioxide enough to increase the global temperature by 2° C within three decades.
Which Countries have Banned Crypto Mining?
China was the first country to put a strenuous crackdown on cryptocurrency mining, citing its harm to the climate. It also completely banned financial institutions from offering any services related to cryptocurrencies in 2021.
In January 2022, the Balkan state of Kosovo banned crypto mining stating it as a reason to deal with the global climate crisis. This came after the state had to shut down its last thermal power plant leaving them with no option but to import their electricity.
Traversing to Western Asia, the Islamic Republic of Iran also placed a 3-month ban on crypto mining. The ban was planned to be lifted on March 6, 2022. This initiative also came into effect to dismantle the illegal mining farms in the country, which allegedly consume around 600 megawatts of electricity.
Countries Joining the League
Russia is the latest power to propose a ban on cryptocurrency use and mining. It is interesting to note that Russia is the third-largest player in Bitcoin mining, just after the United States and Kazakhstan. The Central Bank of Russia suggested a ban on cryptocurrency mining to reduce the excessive power consumption required to run crypto.
To the West of Russia, a leading member of the European Union has suggested a block-wide ban on the prominent form of mining Bitcoin expressing his concerns on the amount of renewable energy spent on crypto. The Vice-Chair of the European Securities and Markets Authority said in an interview to the Financial Times that Bitcoin mining is becoming a national issue for Sweden. He also indicated that cryptocurrencies are now posing a threat in meeting the Paris Agreement’s climate change goals.
After Effects of the Ban
After China imposed a ban on crypto mining in September 2021, power generated from renewable energy decreased from 41.6% to 25.1%. The percentage crashed as miners decreased their use of Chinese hydroelectric power and shifted to countries like the United States and Kazakhstan, where power is derived from gas and the harshest form of coal.
According to researchers, the carbon emissions from Bitcoin mining are now equivalent to Greece. So, the entire network of Cryptocurrency mining has become less green. Appalling right?
What is the Alternative?
Researchers have concluded that they need to decarbonise to align the crypto industry with the environment. Initiatives like the Crypto Climate Accord must be kept in the forefront for others to replicate. This initiative has been made by more than 200 companies and various individuals.
The members of this accord aim to reduce their carbon emissions from electricity consumption to net-zero by the year 2030. However, some researchers suggest that an immediate solution to this grave problem is nowhere in sight. The ban on cryptocurrency by China has only harmed the climate.
The criticism against crypto mining has been mounting. Keeping this in mind, the miners have increased the use of renewable energy to power their computers by transporting to countries with abundant solar power and wind like Norway or Sweden. This step might be a game-changer if the crypto mining industry strives to survive.
