Is Cryptocurrency Bad For The Environment?
We’ve been made all kinds of promises about cryptocurrency, only some of which can be true. Those who believe most fervently in the decentralised digital currencies say that they’ll only day replace regular forms of currency altogether. That seems unlikely. Even those who don’t believe that often think they offer a better potential return to investors that most securities. They might have a point about that. We’ve seen almost every notable named cryptocurrency make huge gains in the past twelve months, although we’ve also seen them make sudden losses. Crypto investments are volatile, but they can be life-changing if you invest at the right time. One thing we’ve never been promised, though, is that they’re good for the environment.
You might have seen a lot of talk about cryptocurrencies and the environment recently, and you might be wondering why. We’re happy to explain the controversy. An increasing number of scientists and environmentalists have spoken out about the perceived impact of “crypto-mining” on the environment. Elon Musk’s Tesla car company led the way by announcing it would no longer accept Bitcoin payments on environmental grounds in May 2021. Now it seems everybody wants to hop aboard Musk’s train. It seems ironic that a man who’s spoken positively about cryptocurrencies as often as Musk has would be at the forefront of such a movement, but such is the eccentric nature of Elon Musk. Also, such is the eccentric nature of cryptocurrency news.
The argument against cryptocurrency mining is that it consumes so much electricity. “Mining” new coins is a labour-intensive process for computing hardware, and requires machines to be switched on and running at full capacity constantly for days and weeks on end. That’s led to alarmist headlines including such remarkable claims as “cryptocurrency uses as much electricity as Argentina,” which is a difficult statement to quantify. Several studies disagree with that assessment, but even if it were true, there’s a reason that Argentina has been chosen as a basis for comparison rather than a different nation. Argentina consumes a remarkably low amount of electricity for a country so large. The fact that cryptocurrency mining apparently requires more power than the entire nation of Argentina says more about Argentina than it does about cryptocurrency mining.
It’s even possible to remove the word “cryptocurrencies” from this equation entirely and come up with a statement that’s still accurate. The reason that cryptocurrency mining demands so much power is that it involves computers processing extremely complex mathematical problems to generate coins. The online slots industry also involves incredible mathematical processing to generate lines of symbols after each spin of the reels. There’s even a direct connection here, because it’s increasingly common for online slots websites to allow cryptocurrencies as a form of payment when placing bets. All of that processing has to be done somewhere. In the case of Rose Slots New Zealand and other slots websites like it, that processing is done on a server. That server has to be online at all times, or people wouldn’t be able to play. Think about the number of slots websites there are in the world and how many people play them, and quickly you’ll realise that we’re talking about an awful lot of server demand. We could have used other industries here, too. Wherever there’s a reason for servers to be online and in use 24/7, there will be significant energy demands. It seems strange of those industries, it’s cryptocurrency generation that’s been specifically targeted by negative headlines.
Putting the question of whether crypto-mining has been unfairly targeted aside for one moment, is there something to be said for the idea that it’s not an environmentally-friendly process regardless of the reasons that might be? Well, let’s consider the facts. The most recent reliable information we have comes from the University of Cambridge in England, which says that Bitcoin mining sucks up 121 terawatt-hours of electricity every year. That’s far less than the ten most energy-hungry countries in the world, but it would be good for a place in the top twenty. That alone might not be disastrous, but the situation is complicated by the fact that two-thirds of all Bitcoin mining activity comes from Chinese “farms.” China burns a lot of coal to generate electricity. If there is an environmental issue with cryptocurrency mining it might be more a case of where the energy comes from rather than how much is being used.
In interpreting the above information, we should remember the difference between mining for Bitcoin and mining for cryptocurrency. While two-thirds of Bitcoin mining is done in China, around seventy-six per cent of all crypto mining is done in countries where renewable energy is used by default. This includes Norway and Iceland, where virtually all energy is renewable. Going even further, we should compare cryptocurrency mining to energy consumption by “real”mining activity. The same University of Cambridge study we referenced earlier says that gold mining alone uses 475 gigajoules of electricity each year. That’s equivalent to around 131.94 terawatt-hours. If cryptocurrencies are the “gold” of the future, it a more environmentally-friendly form of gold than the one we spend so much time, money, and energy trying to mine for now.
Cryptocurrency mining does have an environmental impact, but not an especially significant one. If the problems associated with energy production could be solved, it would have no impact at all. For a company like Tesla, which makes cars, to call Bitcoin mining environmentally unsound doesn’t make sense when you consider the amount of energy involved in making cars. There are many good reasons to be wary of mining cryptocurrency or investing in it. Performance is often unpredictable. Mining gets harder all the time. The next peak or trough could happen on any given day for any reason or no reason at all. These are all things that people should worry about if they have an interest in crypto. The environment isn’t. Every type of activity that demands a lot from computers uses a lot of power. Cryptocurrency isn’t special in this respect - and so it shouldn’t come in for special types of criticism.