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The Environment's Burden of Cryptocurrency

As the world is struggling with how to effectively combat climate change, excessive use of fossil fuels, farming and industrial pollutants have played a major role in the crisis. However, in recent years the conversation is shifting to cryptocurrency and its impact. There’s a lot of buzz these days about cryptocurrencies, the private sector's digital version of safeguarding money from theft by encryption and blockchain technology counting, which produces a myriad of digital ledgers on computers spread around the globe. Let's look at what cryptocurrency is and how it operates to get a better understanding of its environmental impact.

 

What is Cryptocurrency?     

Cryptocurrency has become a mainstream phenomenon in the 21st century. It has become a household name since its inception as a well-established notion in 2009. A cryptocurrency is an electronic medium of trade that has no physical counterpart, such as a coin or a dollar bill, and no money has been staked to begin it. Bitcoin, the world's most popular cryptocurrency, which accounts for more than half of all cryptocurrencies, may be used to purchase cars, furniture, trips, and other items. As we all know, the rise of additional rival coins such as Altcoins, as well as the growth of Bitcoin has elevated cryptocurrency to a pedestal where it attracts greater attention.  Cryptocurrencies are decentralized, which means they are not regulated by a central authority such as a bank or government. The benefit is that there are no transaction fees, it is accessible to everybody, and it simplifies transactions such as transmitting money across national borders. The people who make the transactions are anonymous and untraceable. However, because of the anonymity and lack of centralized control, tax evaders, criminals, and terrorists may be able to negatively use cryptocurrencies. Cryptocurrencies can be bought and sold by investors in addition to being used for purchases and transactions. According to CNBC, the global market for cryptocurrencies surpassed $2 trillion for the first time in April 2021, with bitcoin being the most valuable digital asset, accounting for more than half of the total market share. Whether as an investor or a trader, cryptocurrency continues to grow in value year after year as a result of massive investment. According to Investopedia, cryptocurrencies have grown in popularity due to the decentralized ideas they promote, as well as the possibility of large gains.

 

How much does cryptocurrency cost the environment? 

Energy Consumption: The electricity required for the mining process, which is how new digital currency is created, is the most visible environmental impact of crypto. While most people are familiar with Bitcoin mining, mining is used in a variety of cryptocurrencies. However, since Bitcoin's launch, it's getting increasingly difficult to create new units of currency through mining. Because the currency's supply is limited to 21 million units, more units are created resulting in fewer units being accessible for mining, and minting new ones requires more processing power. Because of the preprogrammed scarcity paired with the opportunity for financial gain (one Bitcoin is now worth roughly $42,000, and the current payout for mining a new block is 6.25 Bitcoin), more people are mining what's left. According to the Cambridge Bitcoin Electricity Consumption Index, Bitcoin mining consumes more electricity per year globally than in some countries, such as the Netherlands and Pakistan. The estimated carbon footprint generated by the power plants that provide the energy is a source of environmental concern. A single Bitcoin transaction is projected to consume 2,292.5 kilowatt-hours of electricity, which is enough to run a normal US family for nearly 78 days. Although electricity appears to be a clean form of energy, many countries generate it by burning fossil fuels, which adds to the carbon in the atmosphere and exacerbates climate change. According to the University of Cambridge, the United States is home to about 35% of Bitcoin mining operations and generates 60% of its electricity from fossil fuels. There's also the problem of tangible electronic waste to consider. Mining is done via computers, graphics cards, and custom-built ASIC rigs, among other things. People are continuously upgrading and discarding old equipment because increased computational power gives them an advantage in the battle to mine more coins, resulting in up to 30,000 tonnes of technological garbage every year.

Water Issues and E-waste: Greenidge and other power plants need a lot of water. Greenidge extracts up to 139 million gallons of fresh water every day from Seneca Lake to cool the plant, then releases it at temperatures of about 30 to 50 degrees Fahrenheit over the lake's typical temperature, hampering the lake's animals and ecology. Its enormous intake pipes also suck in and destroy larvae, fish, and other creatures. Even if it becomes possible to power all bitcoin mining on renewable energy in the future, the problem of e-waste will still exist. Miners need the most efficient hardware to be competitive and capable of executing the most computations per unit of energy. Every 1.5 years, this specialized hardware becomes obsolete and can't be reprogrammed to do anything else. The Bitcoin network is predicted to generate 11.5 kilotons of e-waste every year, adding to our already massive e-waste problem.

NFTs: NFTs, a new art phenomenon has added to the environmental worries regarding cryptocurrencies. These are non-fungible tokens, which are digital files of images, music, films, and other types of artwork that have been stamped with unique code strings. People can look at or duplicate NFTs, but each buyer has only one NFT, which is stored on the blockchain and secured using the same energy-intensive proof of work procedure. NFTs are selling for hundreds of thousands of dollars; one NFT sold for more than $69 million to Beeple, a digital artist.

 

What can be done to make cryptocurrencies more sustainable? 

It would be difficult to move to a more energy-efficient system because the entire Bitcoin network has spent millions of dollars on hardware and infrastructure, especially because there is no central control authority. However, a lot of initiatives are underway to lower Bitcoin and cryptocurrency's overall carbon footprint. Elon Musk, the CEO of Tesla, met with the heads of the major crypto mining companies in North America to discuss their energy consumption. As a result, a new Bitcoin Mining Council was established to encourage energy transparency. 

Another proposal, backed by 40 projects, is the Crypto Climate Accord, which aims to make blockchains run on 100 percent renewable energy by 2025 and for the entire cryptocurrency industry to be carbon-neutral by 2040. It aims to decarbonize blockchains by promoting the use of more energy-efficient validation methods, advocating for proof of work systems to be located in areas with excess renewable energy that can be tapped, and encouraging the purchase of certificates to support renewable energy generators, similar to how offsetting carbon support green projects. Efforts to make crypto more environmentally friendly include using methane gas from fossil fuel drilling that would otherwise be burned off, as well as locating plants in regions with plentiful wind power, like West Texas.

Developers are focusing on the architecture of future cryptocurrencies to save energy, mostly by switching to new validation systems that aren't based on proof of work. The proof of stake (PoS) system, for example, is gaining traction and is based on how much of a given cryptocurrency a user has pledged to stake, or hold and not sell. In comparison to the race to crunch through equations that come with mining in a PoW system, this consumes less processing resources. Ethereum's blockchain will soon utilize a variant of the PoS method to verify new blocks. Other methods, such as evidence of history, proof of elapsed time, proof of burn, and proof of capacity, are also being developed.