What is the Climate Impact of Cryptocurrencies
Cryptocurrencies' popularity has skyrocketed in recent years, making their climate impacts more difficult to ignore than ever before. Come check out our blog to learn more!
Everyone seems to be talking about cryptocurrencies these days. There are Bitcoin, Dogecoin, Ethereum, Monero, and hundreds of other ones promising to be the way of the future. But what about their environmental impact?
Mining precious resources has made many people rich and paved the way for great innovations. On the other hand, it often creates a terrible environmental impact, which apply to cryptocurrency “mining” as well.
How Do Cryptocurrencies Work?
Instead of being cleared by a bank, users conduct bitcoin transactions through a decentralized network known as a blockchain. Bitcoin miners compete to register the latest “block” of transactions by solving cryptographic puzzles. The first one to solve the puzzles gets rewarded with a new bitcoin. But these aren’t puzzles that a human can do easily and have to depend on computing.
For the miners, it’s worth it. They receive 6.5 bitcoins per block and, at the time of writing, one bitcoin is worth over $48,000 (USD). The remarkable increase in the value of bitcoin and other cryptocurrencies over the years has led to the development of mining “rig farms”, which are server farms working around the clock to mine bitcoin. The result is a massive usage of energy.
Cryptocurrencies Are Highly Energy-Consuming
According to the Cambridge Bitcoin Electricity Consumption Index, the worldwide bitcoin-mining footprint now accounts for about 120 hours terawatt-hour of energy per year. To put that into more understandable terms, that amount equals the domestic energy consumption of the entire country of Sweden! According to Digiconomist, one bitcoin transaction uses as much energy as the average American household consumes per month and is responsible for approximately a million times more carbon emissions than a single Visa transaction. The climate crisis is already happening and might get much worse; therefore, justifying these emissions for a pretend currency seems ludicrous.
And yet, cryptocurrencies continue to hold an allure for investors and businesses, including small and medium-sized enterprises (SMEs). Notably, cryptocurrency mining is not as environmentally damaging as it once was, as miners chase renewable forms of energy to use for their mining, which is also usually cheaper. However, this process can cause problems, such as when miners dramatically drove up the costs of energy in Plattsburgh, New York, using hydroelectricity.
So what are the necessary steps for SMEs if they still want to embrace the (potential) future and accept and make cryptocurrency transactions but minimize their carbon footprint? For now, even though it’s improving, there’s no question that bitcoin and other cryptocurrencies that rely on mining are bad for the environment. But there are other blockchains like EOS and Cardano which don't use mining.
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