The Environmental Cost of Cryptocurrency + 3 Sustainable Solutions
Cryptocurrencies like Bitcoin and Ethereum have become increasingly popular in recent years, with many individuals and businesses investing in these digital assets. But the rising popularity of crypto has led to concerns about the amount of energy it consumes since mining (i.e. producing and verifying) these assets requires significant computational power.
As of March 2022, Bitcoin mining’s total global energy consumption was estimated to be around 204.5 terawatt-hours (TWh) per year. This is more than the annual electricity usage of countries like Thailand. Or as The Economist puts it: “if Bitcoin were a country, it would be the 23rd largest energy consumer in the world.”
This is a growing concern as the demand for digital assets continues to rise. According to a Q3 report by the Bitcoin Mining Council, energy usage from Bitcoin mining alone increased by 41 percent in the previous 12 months. If this trend continues, cryptocurrencies could have a significant impact on global consumption and greenhouse gas emissions.
Because cryptocurrency is a decentralized currency system and anonymous users do most of the mining, understanding which types of energy sources power these transactions can be a challenge. The University of Cambridge’s 3rd Global Cryptoasset Benchmarking study, published in September 2020 did find, however, that 62 percent of global miners use hydropower for part of their electricity; 38 percent use some coal; and approximately 39 percent of miners around the world use some combination of wind, solar or geothermal energy.
Along with creating greenhouse gas emissions, crypto mining produces a significant amount of e-waste resulting from the mining machines which become obsolete after about 1.5 years of use—and can’t be repurposed.
To mitigate these impacts, several possible solutions have been proposed.
Three Sustainable Cryptocurrency Solutions
- Many cryptocurrencies use a proof-of-work (PoW) algorithm, which requires miners to perform complex mathematical calculations to verify transactions and create new blocks in the blockchain. One alternative is Proof-of-Stake (PoS), which requires users to stake a certain amount of cryptocurrency to participate in the verification process. This method, used by coins such as Cardano and Chia among about 19,000 others, is considered more energy-efficient as it requires less computational power.
Ethereum, the second-largest cryptocurrency, consumed a significant amount of energy, using between 46.31 and 93.98 TWh per year before a September 15, 2022 event dubbed The Merge, where Ethereum transitioned from a Proof-of-Work to a Proof-of-Stake consensus mechanism which helped reduce its power consumption by 99 per cent.
- Another possible solution is to transition to renewable energy sources. Many cryptocurrency mining operations are currently powered by coal and other non-renewable energy, which contribute to greenhouse gas emissions. Moving to solar, wind, or hydroelectric power could significantly reduce crypto’s environmental footprint.
- There are several policy initiatives underway designed to address the issue of cryptocurrency and energy usage. For example, the Crypto Climate Accord, inspired by The Paris Agreement and launched in April 2021, aims to decarbonize the cryptocurrency industry by transitioning to renewable energy sources and adopting more energy-efficient mining methods. The accord has been signed by several cryptocurrency companies, including Ripple, CoinShares, and ConsenSys.
By adopting more energy-efficient mining methods, using renewable energy sources, and supporting initiatives to decarbonize the cryptocurrency industry, organizations can help reduce the environmental impact of cryptocurrencies while still benefiting from the advantages they offer.
If your organization is working towards sustainable solutions in crypto, waste, energy, apparel or another sector, visit Intengine.com to create a free listing on the world’s largest directory of sustainable businesses.
Tags: cryptocurrency, blockchain, proof of stake, pos, cryptocurrency mining