The hidden impact of cryptocurrencies on the environment

One might think that the next generation of technological advances, such as cryptocurrency and cloud computing, will bolster advanced solutions to address developmental challenges, yet, along with benefits these technologies have major drawbacks. 

On the positive end, cryptocurrency can provide a decentralised way of transaction of funds that are private and secure, so unlike traditional currencies that are produced by a central entity - such as a bank - where production and consumption is overseen. .  On the negative end, the world’s largest cryptocurrency “Bitcoin” consumes an estimated 150 terawatt-hours of electricity annually. To put that into perspective, it is more than what Argentina’s population (45 million people) consumes yearly.  Thus, a new set of challenges hinder the fight against the climate change. 

The consumption of such an amount of energy contributes to emissions of greenhouse gases (GHG), which in return produces a warming effect (global warming); this amount of electricity consumption emits around 66 megatons of carbon dioxide per year.  

Crypto consumes this amount of energy as it requires mining operations where computers with massive powers are equipped with special chips solving mathematical equations to produce blocks of bitcoin as fast as possible.  Speed is essential in this type of transaction given that there is competition among miners;  whoever solves the equation fastest reaps rewards. Thus, the computers need to be efficient, constantly updated resulting in a high turnover in computer purchase and producing huge electric and electronic waste annually.

As the world is considering climate change as a global threat, cryptocurrency minors need to prove to the world and especially environmental activists that it can mitigate the CO2 emissions.  

80% of GHG is produced in G-20 countries* which house some of the cryptocurrency farms.  However, G-20s are not making adequate efforts to stop the 1.5oC of temperature rise – declared by the IPCC as threshold for temperature rise- but they are actually adding an additional burden to the business-as-usual scenario of emissions. 

1.1Crypto: more GHG emissions and e-waste

Mining operations for production of cryptocurrency is mainly taking place in seven mining groups around the world which own 80 per cent of crypto farms.  They are located in China, USA, Russia, Switzerland, Iceland and The Netherlands.  In the past ten years, their electricity consumption increased tenfold driving greater GHG emissions.

To maintain the mining efficiency, new and powerful computers are constantly purchased. These large specialised machines consume massive energy,  but moreover, additional energy consumption is necessary for cooling and ventilation machines to avoid overheating.  Emissions are only part of the negative equation; crypto farms clearly generate e-waste (old computers). Mining facilities produce 30,700 tonnes of e-waste per year, more than what a midsize country produces. 

1.2Decarbonising Crypto

The impact of GHG emissions falls hardest on the country of origin, where they have been emitted from (bitcoin facilities), while e-waste is transported to other poor developing countries which have to suffer the environmental negative impacts of the waste, when not treated in an environmentally sound manner.   

Cleaning crypto’s carbon footprint is complex, however renewable energy can offer hope.  For renewable energy to succeed, other technicalities should be considered such as the grid, availability of clean resources in mining countries and the selection of the part of the crypto production process that should be mitigated (miners, exchanges, investments and e-waste receivers).  Additionally, a mitigation option should be considered which is changing of the software code that works on how miners solve the equations (algorithm), which can save 99 per cent of energy if adopted.   

The planet cannot afford any extra heating due to man-made reasons. Drastic changes are required immediately to how business is done, especially with coal powered plants that remain part of many countries’ budgets. 

1.3Conclusion

Would you like to see an increase in climate disasters (under 2.7oC increase scenario), where we will certainly experience 7.5 more times than last decades of weather-related disasters such as heatwaves? If your answer is no, then a change in lifestyle especially in the demand management for energy intensive services, burning of fossil fuel and electricity generation are a must.  

The hidden impact of cryptocurrency is joining the demand side of energy intensive industries.  Even with fluctuations in the demand for Bitcoin, it has been brewing a growing base of investors globally. Even if it loses its value, countries will be left with vast lands of servers. 

It is not a discussion about crypto going green but more of the world’s obligations - like Paris Agreement - that has been made towards the earth, if humans continue the same track, with no mitigation or adaptation efforts, we will likely lose many of the earth’s characteristics. Crypto is an example of some of the humans’ choices made during the fourth industrial revolution era which requires from us to connect the physical, biological spheres with the digital realm. 

Reem Alhaddadin, Researcher at the WANA Institute