Cryptocurrency is a digital currency that can be used to purchase goods and services, but uses an online ledger with strong cryptography to secure transactions. Cryptocurrencies work on what’s called a “blockchain,” which is essentially a gigantic database of information that cannot be altered or tampered with.
There are many, many different cryptocurrencies including Dogecoin, Ripple, Ethereum, etc. but Bitcoin is the largest. It was the first decentralized cryptocurrency, launched in 2009. Bitcoin has inspired hundreds of imitators, but it remains the largest cryptocurrency by market cap, a distinction it has held in its more than decade history.
Public blockchains like Bitcoin are extremely transparent. The nature of blockchain technology means that all data is immutable, traceable and permanent, meaning anyone can see the balance and transactions of any wallet address. Nobody, not the government, not even advanced hackers can contest, change or delete what you own on the blockchain.
When you buy any type of cryptocurrency, store it in a digital wallet that uses advanced encryption, rather than a standard bank account. In the cryptocurrency world, “mining” is performed by complex, high-performance computers. Bitcoin miners run complex computer rigs to solve complicated mathematical puzzles called proof-of-work (PoW) to confirm groups of transactions called blocks; If successful, these blocks are added to the blockchain record and miners are rewarded with a small number of bitcoins. Other participants in the bitcoin market can buy or sell tokens through cryptocurrency exchanges or peer-to-peer.
Bitcoin is booming and its price surpassed $60,000 in October 2021, but it is said to be the least efficient due to its uncontrollable demand for computer hardware and energy. Below are some of the reasons Bitcoin is bad for the environment:
Consumes a lot of energy
To quote Elon Musk, “The energy consumption trend for cryptocurrencies over the last few months is insane.” Musk was referring to the amount of energy required to create the “mining” of Bitcoin, which is done by high-performance computers that convert in an energy-intensive process solving complex mathematical puzzles. This process often relies on fossil fuels, particularly coal, in most cases. To put things in perspective, analysts at Deutsche Bank estimated that if Bitcoin were a country, it would use about the same amount of electricity per year as Ukraine.
As of March 2021, Bitcoin’s electrical footprint was just over 75 percent of the Netherlands’ total energy production and about 9 percent of Russia’s. Similarly, there are various other researchers who claim how disastrous the virtual coin is for the environment. One bitcoin transaction reportedly uses 1,544 kWh of energy, which is equivalent to the energy that can power an average US household for 53 days. Bitcoin’s energy consumption numbers are very worrying as the numbers are increasing rapidly.
Produces more e-waste
Due to the high energy consumption, a large amount of electronic waste (e-waste) is produced when mining the virtual currency. E-waste is one of the main causes of water and soil pollution as discarded electronics, toxic chemicals and metals are deposited in water and soil.
Due to the limited availability of resources used in the manufacture of chips such as silicon and quartz, e-waste is becoming a problem. Since the lifespan of the equipment Bitcoin miners use is only around 18 months, a lot of hardware is quickly consumed and eventually becomes e-waste. The research claims that the e-waste produced by Bitcoin per year (24 kilotons) is the same as the e-waste produced by an entire country (Netherlands).
Larger carbon footprint
Bitcoin mining consumes an enormous amount of energy, resulting in a larger carbon footprint with each passing year. As the value of Bitcoin increases, so does mining, which means the puzzles get more complex and companies invest in computing power.
Since only a limited amount of Bitcoin can be produced daily, miners come online to compete in PoW mining, making the puzzle harder and production slower, making them very energy inefficient. In research, the figures were shocking, where the carbon footprint of a single virtual coin was identical to 1,879,709 Visa transactions. Less Renewable Energy Consumption Bitcoin has long been criticized for its negative environmental impact, defenders still say that switching to renewable sources would reduce its carbon emissions, but the truth is that Bitcoin still consumes a colossal amount of energy.
According to reports, only 39 percent of PoW mining for virtual coins is done through the use of renewable resources. Miners are still moving to different parts of the world where fossil fuels are still being massively used. Many private companies are buying disused coal-fired power plants and turning them into a power plant-cryptocurrency mining hybrid. Environmentalists worry that waste coal, the leftover materials from coal mining, can leach harmful chemicals into surrounding soil and water sources. And it still produces carbon dioxide when burned.
A Columbia Business School researcher quoted: “There is a new generation of crypto coming on board, they will move away from Proof of Work (PoW) for a number of reasons, one of which is the environmental impact, because most of it will be created by young programmers . They are certainly more environmentally conscious and hopefully understand the impact of the work beyond what they are building and consider the complexities of today’s world.”
Cryptocurrencies need to become more sustainable. They cannot ignore environmental concerns if they want wider adoption, and that newer and greener cryptocurrencies will eventually eclipse Bitcoin.
(The author is the founder of Smiling Tree)
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