A photo of a bitcoin resting on a wallet. Bitcoin uses more energy on cryptocurrency mining each year than the entire country of Argentina. CRYPTOWALLET.COM / CREATIVE COMMONS VIA FLICKR

Katharina Buczek is a senior journalism major with a minor in media art

Bitcoin uses more energy for cryptocurrency mining each year than the entire country of Argentina. Ethereum, another popular cryptocurrency, uses the same amount of power as the nation of Qatar. Despite being coined “the future of money” by many, cryptocurrency mining will destroy the environment way before we ever reach said future.

Cryptocurrencies have surged in global popularity. In April 2021, the value of the cryptocurrency market topped $2 trillion for the first time. They are appealing to the public because of a supply cap that makes it impossible for most government agencies to dilute their value through inflation. 

This explosion in demand does not bode well for the climate, since the process by which cryptocurrencies are mined is severely damaging to the environment. Rather than storing transactions in a single-user database, cryptocurrencies use blockchain technology, which stores incoming data in blocks that are then chained together. This unique storing process, coupled with a limited supply, forces computers to race in order to solve cryptographic algorithms. Once the puzzle is solved, a new block is recorded.

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Because it does not rely on a single point of failure, some cryptocurrency supporters feel this approach is superior to centralized currencies. Still, at what cost should we prioritize investment above protecting our environment?

Not only is this amount of energy use staggering, but it will also never decrease so long as crypto mining continues. A major point of concern among environmentalists is that mining becomes less efficient as the price of cryptocurrency increases. More blocks are needed in the blockchain, so the mathematical equations become more difficult to solve. In turn, even more computing power is needed despite processing the same amount of transactions. 

Still, the shocking levels of energy usage are not the root of the problem — it is where this energy comes from. According to the Cambridge University Bitcoin Electricity Consumption Index, about 65% of Bitcoin mining has occurred in China. China sources most of its electricity via coal burning, a significant contributor to climate change because of carbon dioxide production. Bitcoin alone produces 36.95 megatons of carbon dioxide annually. This is comparable to New Zealand and could increase global temperatures by two degrees Celsius in thirty years. 

Some supporters of crypto mining have claimed that mining operations concentrate around areas with surplus renewable energy. But these claims remain controversial and unconfirmed. For example, a 2019 report by CoinShares, a pro-cryptocurrency research firm, estimated that 74% of Bitcoin’s energy usage came from renewable resources. The Cambridge Center for Alternative Finance rebutted this claim with a study concluding that only 39% of Bitcoin mining uses renewable energy. Even if the larger estimate of renewable energy usage was true, cryptocurrency mining still represents an alarming threat to our environment. 

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On Friday, Sept. 24, China declared all financial transactions involving cryptocurrencies illegal and issued a nationwide ban on cryptocurrency mining. Although a possible win for environmentalists, China did not act with climate change concerns in mind. Instead, the country’s central bank has tested its own digital currency in order to monitor citizens’ transactions. 

After the news, Bitcoin’s value dropped 7% but has since recovered. The new law is also unlikely to make a considerable difference in environmental effects. Alex DeVries, an economist in the Netherlands who studies the environmental effects of the crypto industry, said, “As long as other countries don’t implement similar policies, the overall effect on the global environmental impact of mining will remain low.” 

Here in the states, federal regulators are also rushing to regulate cryptocurrencies. The Treasury Department plans to issue a report this fall that outlines how to address cryptocurrency risks. Again, though, these recognized “risks” by the Biden administration only concern the financial market and have no mention of environmental impact. President Biden and his administration have been touting a “revolutionary” climate change policy — so shouldn’t cryptocurrency mining also have a space on his agenda in Washington?

As the debate over cryptocurrency regulation continues worldwide, it is possible for networks like Bitcoin and Ethereum to have negligible effects on the environment. A different database system, known as proof-of-stake blockchains, actually requires no mining and is already in use by some smaller agencies. Still, it is difficult for large, established networks to transition to new database systems. It remains to be seen if major cryptocurrencies have any plans to acknowledge and/or curb their enormous energy usage. 

Elon Musk, founder and CEO of Tesla and SpaceX, was once a large proponent of cryptocurrency. In May, though, Musk tweeted, “Cryptocurrency is a good idea on many levels and we believe it has a promising future, but this cannot come at great cost to the environment. Tesla will not be selling any bitcoin and we intend to use it for transactions as soon as mining transitions to more sustainable energy.” Elon Musk had $2.5 billion in bitcoin prior to this tweet. If someone with such a colossal vested interest in the cryptocurrency market can take a firm stance in favor of the environment, it’s time that the public does the same.

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The latest report released by the Intergovernmental Panel on Climate Change found that some effects of climate change, like sea-level rise, are irreversible over the next hundreds to thousands of years. Still, large reductions in carbon dioxide emissions can help limit climate change and potentially stabilize global temperatures in 20 to 30 years. Regulating crypto mining to be sourced solely from renewable energy should be a priority in the fight against global warming before it is too late.

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1 comment

  1. Kat, really well written and interesting article. I had no idea how this works and plan to look into it further. Thank you for the info!

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