By now, most people have heard of Bitcoin. With the rise of digital products such as NFTs, our world is shifting more and more online. But unless you’ve gone down the rabbit hole yourself and bought some crypto, you might still have questions about how it all works.
What is Cryptocurrency In the First Place?
Cryptocurrency uses blockchain technology to verify transactions. A blockchain is a list of records linked together through cryptography. Because of the way that the blockchain works, the data and transaction records are resistant to tampering and therefore can function as verifiable currency: the same way that you can tell if a dollar is counterfeit by checking for the security thread, watermarks, color-shifting ink, and microprinting, one can verify that a Bitcoin is legitimate through its blockchain records.
Bitcoins are created through a process known as “mining.” According to Bitcoin.com, “Bitcoin mining is an essential component of the network's system for arriving at consensus as to the current state of the ledger.” In order to mine Bitcoin, extreme computing power is required in order to create new blocks in the blockchain updating the state of the ledger. In essence, Bitcoin’s own security protocols are what make the currency so secure in the first place; which is mind-bending!
The Environmental Impact of Mining is Great
Unfortunately, here is exactly where Bitcoin’s negative environmental impact comes into play. The computing power required to mine coins is astronomical--according to Investopedia, the network “uses 121 Terawatt-hours of electricity every year… more than the entire country of Argentina.” A recent study done by the University of Cambridge found that coal accounts for about 40% of miner power. That’s not a great figure. And the energy needs of mining Bitcoins only increase as time goes on, because Bitcoin is a finite resource. According to NBC, a study in the 2019 Joule scientific journal found that “Bitcoin production is estimated to generate between 22 and 22.9 million metric tons of carbon dioxide emissions a year.” That is equivalent to 2.7 billion homes.
Until very recently, most mining (over 60%) has taken place in China. However, China has as of late attempted to dissuade Bitcoin mining due to its carbon footprint. Unfortunately, this just means that miners are now moving operations to other countries. There needs to be a more widespread crack down on mining so that is no longer an option. The energy requirements of cryptocurrencies like Bitcoin are unsustainable and pose great threats to the future of the environment
The hardware used on mining farms has its own inevitable environmental impacts--between 8,000 to 12,000 tons of unrecyclable circuits, or E-Waste, per year. On top of that, the mining plants have large amounts of hardware that needs to be cooled. According to Columbia Climate School, one plant in New York “draws up to 139 million gallons of fresh water... each day to cool the plant and discharges it some 30 to 50° F hotter than the lake’s average temperature, endangering the lake’s wildlife and ecology.”
The Shift Towards Environmentally Friendly Cryptocurrency
Tesla announced in May that they would no longer accept Bitcoin as payment, after in February purchasing a large amount of crypto to use for future projects. This represents a large shift in public awareness towards recognizing the various impacts of cryptocurrency on the environment.
Bitcoin’s biggest competitor, Ethereum, is “set to slash its energy consumption by 99.95% within months as it makes the transition to a new infrastructure model.” The switch to Ethereum 2.0 will be seamless and transformative. Ethereum will be able to cut its environmental impact due to a shift away from Bitcoin’s “proof of work” mining model and towards a new innovative “proof of stake” validation process that does not require the same extreme computing power. According to The Ethereum Foundation, as of November 29th, 2021, the switch to Ethereum 2.0 is in the finalization stage.
In the Meantime, Other Eco-Friendly Options Exist
Many more lesser-known cryptocurrencies exist, and they hope to break into the ever-growing crypto market with an emphasis on sustainability that rivals Bitcoin and Ethereum. One of those is Cardano, created by the co-founder of Ethereum, with the ability to process 1000 transactions per second compared to Bitcoin’s 7. Cardano has the third-largest capitalization in the cryptocurrency market. It has slowly been adopted by a few other platforms including NFT marketplaces, which with the growing popularity of the NFT scene could mean great things for the future of the currency. Cardano does all of this on the basis of sustainable, proof-of-stake technology that makes it one of the most popular green cryptocurrencies today.
Other green cryptocurrencies include:
Nano (NANO): has one of the lowest carbon footprints
Stellar (XLM): used by IBM, Nigeria, France and India
SolarCoin (SLR): gives users SolarCoins in return for using solar energy
These coins are just the tip of the iceberg. The future of cryptocurrency looks promising, especially with the new emphasis on sustainability being followed even by industry leaders like Ethereum. It’s a welcome change that not all cryptocurrencies today are harming the environment--some are even helping.