Is Cryptocurrency Mining Bad for the Environment?
You have most likely heard of Bitcoin, the most popular and expensive cryptocurrency on the market. Maybe you've even heard of the meme crypto, Dogecoin. And if you know anything about cryptocurrency, you know that "mining" takes hundreds of computers in warehouses. Think of it like printing, but really different and more complicated. I won't go into the details of how Bitcoin and other cryptos work, but it's through blockchain technology, and it's all digital. So the question I'm trying to answer today is: is cryptocurrency mining bad for the environment? With a focus on Bitcoin because it is the most popular and most sought-after coin.
Proof of Work vs. Proof of Stake
To help understand the environmental impact, you need to know that Bitcoin runs on Proof of Work to validate transactions, and this is an energy-intensive process for computers. As more coins are mined, the equations become more difficult, meaning that energy usage is steadily increasing. Although, this isn't the only way that cryptocurrency transactions can be validated. There is a new mining/validation system called Proof of Stake, which uses less energy and is said to be less risky. Many altcoins (smaller, less prominent ones) are actually using this in technology in their mining process. Ethereum 2.0 is expected to also run on Proof of Stake and not Proof of Work. This will save energy and decrease the overall footprint of cryptos as a whole.
Where Does the Energy Come From?
High energy usage is not the only factor to consider when determining if mining is bad because using a lot of energy is not inherently bad for the environment. The main thing to consider is: where does the energy come from? According to Investopedia, the answer to this question is China [mostly, 65%], and most of China's electricity comes from burning coal [bad for the environment]. However, another study mentioned in the Investopedia article argues that renewable sources generate most of the energy used in mining. "A 2019 report by CoinShares, a pro-cryptocurrency research firm, estimated that 74.1% of the electricity powering the bitcoin network came from renewable sources, making bitcoin mining "more renewables-driven than almost every other large-scale industry in the world." Honestly, it's hard for me to say the correct answer; if I had to make a judgment call, I would believe most energy is from non-renewable sources. I say this because most countries (including the US) generate about a fifth of their electricity usage from renewables. As stated here, there are no excess renewables in most places yet. There will be in the future, but there isn't now.
Bitcoin's Environmental Impact
Bitcoin's impact is hard to accurately determine since mining is not always reported. Bitcoin does use Proof of Work which, as mentioned before, is energy-intensive, and as with most energy, pollution is released into the air. In a 2019 study, researchers stated, “So it’s basically a trade-off of a private value: $1 in private value, compared to a 49 cents in social costs that society faces through health and the environment.” Clearly demonstrating concern not only for the environment but also for public health.
To keep with the complex computations and to become faster miners, people are upgrading their equipment at a much faster rate. This increases e-waste, which is also an environmental issue and public health issue. E-waste is hazardous and will leech its toxic chemicals into the ground if not disposed of properly. If you have not heard about e-waste pickers, please research these practices; here is one article on them. Ultimately as we know, excessive consumption is bad for the environment, and the more we put it into landfills, the worse our climate will get.
It's important to remember that not all cryptocurrency is bad for the environment and as technology advances, we can hope that the impact of digital currency decreases. I think it's important for us to develop renewable energy and invest in currencies using Proof of Stake. I don't think that avoiding or shaming cryptocurrency is the answer because our world is ultimately becoming digital. The best way to mitigate the impact relies on making the processes of validating transactions more efficient and ensuring that countries with lots of miners are investing and expanding their renewable energy sources.