Blind to the True Environmental Cost of Crypto
Isabelle
Schlegel
March 22, 2022

Cryptocurrency, or “crypto,” refers to online, decentralized currencies that are used to virtually buy and sell goods and services. Crypto is akin to an arcade token of sorts; people exchange established currencies, like dollars or euros, for digital tokens which can be used to buy specialized goods. Part of the appeal of crypto is its security: crypto is based on a secure ledger system, in which all transactions between parties are recorded and verified using highly secure public verification

Open Source from Pexels. Posted by Olya Kobruseva

Investors also like crypto because it is a decentralized currency. Unlike dollars or euros, it is generally not issued by a central authority or bank, and therefore is not heavily regulated by a government or subject to environmental restrictions — a major draw for buyers and sellers in the crypto market. 

The process of accumulating cryptocurrency is called mining. Across the globe at any given minute, thousands of supercomputers are utilizing cryptographic technology to crack mathematical equations that essentially verify the legitimacy of crypto transactions. The process is painstaking and requires very complex algorithms, but miners are rewarded with free cryptocurrency tokens in exchange for their work, without having to pay real currency to buy the digital coin. With a little luck, mining can be very profitable in the highly variable crypto market. 

Both in popularity and value, crypto has seen a boom in recent years. Although mostly a traded commodity nowadays, cryptocurrencies’ use as a transaction service is becoming increasingly common. 

Despite being a completely paperless currency, crypto has a surprisingly large environmental impact, one that will only grow if crypto continues to soar in popularity and replace cash transactions. 

Image from AFP

Crypto mining is an energy-intensive process. Supercomputers must solve complex math problems in order to create new digital coins, and for miners to receive free Bitcoin in exchange. Here’s the catch: there are a finite number of Bitcoins that can be created, and with each one discovered, the harder the algorithms required to find the next one become. 

This means mining Bitcoin is becoming exponentially more energy intensive every ten minutes. Bitcoin was the first cryptocurrency on the scene in 2009, but many others are quickly gaining popularity. There are now over 1,300 cryptocurrencies traded worldwide. Bitcoin mining used to be possible on a normal computer; now, it requires supercomputers that require extreme amounts of energy to test solutions again and again, until they crack the code. These supercomputers are energy hogs, demanding inordinate electrical power for their calculations and cooling needs.

For Bitcoin alone, estimates put the energy costs associated with its mining and transactions between 100 and 200 Terawatt Hours — enough to rival the annual energy costs of a medium-sized country like Ireland. Similarly, a single Bitcoin transaction uses 700 Kilowatt hours of electricity, which is equivalent to nearly a month of energy use by the average American household.

And as crypto becomes increasingly competitive, the more complex the algorithm will become to keep the same rate of mining and the more energy intensive the whole process becomes. In short, crypto mining is stuck in an ever-worsening unchecked positive feedback loop that has allowed it to surpass the annual energy needs of entire countries like Argentina and threatens to accelerate climate change even further. 

Since many countries’ energy grids are still reliant on non-renewable sources, Bitcoin’s high energy usage has dire implications for carbon emissions. Digiconomist, a platform for exposing the unintentional consequences of digital trends, estimates that Bitcoin mining releases 90 million metric tons of CO2 annually. The 2021 Bitcoin surge alone may soon surpass the energy needs of all data centers worldwide. Without regulation, these levels will skyrocket as interest in mining and trading increases cryptocurrencies’ value.

Graph from Fortune.com

The damaging impact of crypto mining goes beyond energy; the process also requires specialized and expensive hardware upfront — the production of which is energy intensive, environmentally harmful, and dangerous to the communities surrounding rare earths mining operations. Even worse, the hardware burns out quickly and cannot be easily repurposed. Every Bitcoin transaction produces as much electronic waste as one iPhone 12, since the hardware required is composed primarily of finite, rare materials like copper, aluminum, and iron. Recycling the materials is difficult too, as the majority of mining-heavy countries lack sufficient resources to do so. A 2018 study found that the health impacts of crypto mining — memorably referred to as “cryptodamages” — amounted to $0.49 in health and climate damages in the U.S. and $0.37 in China for every dollar of Bitcoin mined.

The energy impact of cryptocurrency embodies multiple manifestations of climate injustice. To maximize returns, supercomputer mining facilities are disproportionately located in countries with cheap electricity costs. Just eleven mining facilities are responsible for more than half of Bitcoin blocks, largely in the Global South. Blockchain technology and Bitcoin mining is another example of the North appropriating and profiting off of resources from the more vulnerable Global South where the impacts remain largely out of sight. 

This high energy usage also has major implications for grid stability. In January of 2021, Tehran, the capital of Iran, experienced a series of energy blackouts largely attributed to cryptocurrency mining’s strain on the power grid during peak hours. Many developing nations face similar energy obstacles at the hands of Bitcoin mining — underscoring the unequal burden Bitcoin places on energy grids in the Global South.

Cryptocurrencies’ widespread and decentralized nature and rapid growth makes their environmental impact hard to regulate, and despite their sky-rocketing popularity, little efforts toward environmental regulation have been made. But as the planet warms and climate impacts become more visible and destructive, every significant source of emissions must be addressed. With China accounting for over 75% of Bitcoin mining today, and more large countries becoming dependent on Bitcoin mining as a key economic sector while appropriating rare earth resources in the Global South, crypto could undermine efforts to transition to green energy.

Government regulation may be the most efficient and effective way of mitigating environmental impacts — much to market neoliberals’ distress. But beyond outright regulation, there are a number of technologies and other policy proposals underway with the goal of improving emission and energy demands of cryptocurrencies. Some economists have also suggested a pollution tax to internalize some of the environmental impacts of mining. A new Bitcoin Mining Council was recently created to improve the sustainability of crypto mining. Many companies are taking an interest in encouraging diminished environmental impact, whether motivated by profit or true environmental concern. Accelerating the transition to renewable energy worldwide would also mitigate emissions associated with mining; if supercomputers ran on solar and wind energy, for example, it would significantly mitigate their emissions, though the rare earths mining impacts remain.  

Even so, crypto is here to stay. As climate change intensifies, we must find a way for crypto markets to run sustainably or to be replaced with something that can be so they do not impede the climate-just future we are working so hard to bring about.

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