Whether you want to or not, it’s hard to dodge the topic of cryptocurrencies. They’ve taken over dinner table conversation and are often touted as the way we’ll pay for everything in the future. In addition to being used to buy stuff, cryptocurrencies are bought or sold by investors. Investing in them, and talking about those investments, has become something akin to astrology – a weird cult that has many non-believers rolling their eyes. Whether it is the future or not, there’s one major factor that shouldn’t be left out of these conversations: The alarming relationship between cryptocurrency and climate change.
In April 2021, CNBC reported that the global market for cryptocurrencies grew to over $2 trillion for the first time ever.The biggest of these digital assets, bitcoin, accounted for more than 50 percent of that value. That’s great news for investors, but the growing popularity of cryptocurrencies has scientists concerned about the dangers they pose to the planet. In a world already thrown into climate crisis, this is a factor that needs to be considered when contemplating any new technology.
It’s hard to think of something like bitcoin as environmentally damaging. It’s lack of a physical manifestation in our lives makes it invisible, and often forgotten, especially when contemplating changing weather patterns or the health of the oceans. But the blockchains involved in cryptocurrency mining require computers (and therefore energy) all over the planet to solve the complex equations that verify transactions, using energy-sucking proof-of-work consensus mechanisms.
PoW requires a decentralised network of mining rigs – sometimes made up of thousands of computers labouring in unison – to solve complex math problems in a race to verify transactions to win new Bitcoins.Ben Piven, Al Jazeera
According to Patrick J. Kiger, writing for How Stuff Works, “bitcoin already uses 149.63 terawatt hours annually, more than entire countries such as Malaysia and Sweden,” and Microsoft co-founder Bill Gates recently told a journalist that the world’s most popular cryptocurrency “uses more energy per transaction than any other method known to mankind”.
The footprint of a single mined bitcoin is estimated at 150 tonnes of carbon – about six times as much as the equivalent amount of mined gold. Indeed, mining the token now requires 66 times more energy than it did just back in 2015, and studies have shown that bitcoin emissions alone could push global warming by 2 degrees as soon as 2033.
In light of all this, earlier in May 2021, Tesla suspended vehicle purchases using bitcoin, citing concerns over the cryptocurrency’s effect on the climate. “Cryptocurrency is a good idea on many levels and we believe it has a promising future,” tweeted Tesla CEO, Elon Musk, “but this cannot come at great cost to the environment,”. Musk did say, though, that they would still use other, less energy intensive cryptocurrencies and would not be selling their bitcoin just yet.
And bitcoin isn’t the only cryptocurrency that’s speeding up the increase in global temperatures either. All of the most energy consumptive virtual coins utilise proof-of-work consensus mechanisms. Ethereum has been catching up fast. Its carbon footprint, according to Digiconomist, is about 22 million metric tonnes – comparable to that of Lebanon. Even Dogecoin, originally designed as a joke, consumes as much energy as the country of Zimbabwe.
However, that terrifying relationship between cryptocurrency and climate change we’re seeing now doesn’t mean we have to abandon the tech altogether. On the contrary, there’s major room for improvement that’s already underway.
Other cryptocurrencies – Cardano, XRP, Stellar and Tron to name a few – already have a lower carbon footprint than bitcoin. It’s also not unrealistic to expect the crypto giant, like all other technologies, to improve over time.
Bitcoin itself, might be adapted to require less energy if the way it’s mined is adjusted. According to Kiger, “some new cryptocurrencies strive to consume less energy by employing alternative methods such as proof of stake, in which allows a miner to validate transactions on the blockchain based upon the number of coins that the miner holds, instead of by solving an equation”. This consensus mechanism could offer cryptocurrencies a dramatically greener future. Ethereum is already planning to switch its network over to this mechanism later in 2021.
According to Ben Piven, writing for Al Jazeera, a third consensus mechanism, proof of space, could be greener still. This method relies on hard-drive storage rather than processing power.
Another possible solution is simply to transition current cryptocurrency networks away from the energy sources that contribute to climate change. It’s already being claimed that greener energy sources, like solar and wind already produce enough energy to sustain the entire bitcoin network nine times over…It just needs to be harnessed correctly.
Fortunately, it seems like nations around the world are quickly catching on to the fact that drastic changes need to be made – and fast.
“To that end”, writes Kiger, “35 companies and individuals involved in cryptocurrency, finance, energy and prominent non-governmental organizations have formed the Crypto Climate Accord (CCA), which aims to make the cryptocurrency industry’s energy consumption 100 percent renewable by 2025″.
It’s clear that there’s a distressing relationship between cryptocurrency and climate change that needs to be addressed. However, one can remain hopeful that the power-hungry tech that so many see as an important part of our financial future might become a little less destructive soon.