Cryptocurrencies revolutionized the financial sector, but is crypto bad for the environment?
The goal of blockchain technology is to provide more control to its users by creating a decentralized and safe landscape. However, it also comes with certain disadvantages.
Namely, creating or mining digital coins requires spending a lot of energy, which can harm the environment. How big is the cryptocurrency‘s environmental impact, and how can it be reduced?
Keep on reading to find out!
Cryptocurrency Energy Consumption
Crypto mining is a term that refers to using blockchain nodes to solve complex mathematical problems for profit. To solve these puzzles, miners will have to use specialized rigs. Solving a puzzle will add a new block to the blockchain, while the miners will be rewarded for their contribution.
Although anyone can mine cryptocurrencies, greater computing power equals higher chances of solving the puzzles. This makes the mining ecosystem very competitive.
That said, computers with high computing power will consume more electricity. For example, 1 BTC transaction consumes 801.93 kWh — the exact amount that the average American household uses in 27 days.
On top of that, mining rigs generate large amounts of heat, so miners must invest in cooling fans. This will further increase electricity consumption. If we do the math, between 0.6% and 2.3% of electricity is spent annually on BTC mining in the US.
If we consider that there are also companies engaged in crypto mining, this number becomes even higher. For example, the global mining industry consumes about 3.5% of total energy annually.
How Crypto Can Be Bad for the Environment
Why is Bitcoin bad for the environment? For numerous reasons. First of all, it uses the proof-of-work consensus mechanism. This mechanism enables traders to send and receive their coins without an intermediary. This made Bitcoin one of the best PoW coins on the market.
However, this mechanism also requires miners. This, as mentioned before, implies a large consumption of electricity. In addition to that, rigs that are specialized for mining BTC can’t be repurposed, which leads to the accumulation of electronic waste. For example, one BTC transaction generates about 410.20 grams of electronic waste.
We also have to talk about the cryptocurrency carbon footprint. Namely, BTC mining emits about 65 metric tons of CO2 annually, accounting for 0.2% of global emissions.
We can also make another cryptocurrency carbon footprint comparison to give you a better picture of its impact on the environment. For example, one BTC transaction equals a carbon footprint generated by 1,718,906 Visa transactions.
And finally, bitcoin’s carbon footprint is 10 times that of coins and banknotes. It’s also four times higher than traditional currencies combined.
Could Cryptocurrency Mining Use Less Energy?
Cryptocurrency’s energy consumption problem can be solved by switching from PoW to PoS consensus mechanism. The PoS mechanism is more eco-friendly since it doesn’t use miners. Instead, it utilizes validators. The task of the validators is to hold and stake their tokens for fees. This requires much less computing power since blocks are validated by both computers and coin holders.
If you compare the proof-of-stake environmental impact with the impact of the PoW consensus, you’ll notice that the former uses 99% less energy.
Moreover, the staking ecosystem is less competitive because all validators receive a reward for their contribution. Some of the best eco-friendly cryptocurrencies that use the PoS consensus include Ethereum and Bitcoin ETF tokens.
Conclusion
As you can see, digital currencies significantly impact our environment. For example, crypto mining consumes large amounts of electricity. At the same time, mining rigs lead to the accumulation of electronic waste. And finally, Bitcoin mining emits approximately 65 metric tons of CO2 every year.
One of the ways to solve the issues related to the sustainability of cryptocurrency is to switch from a PoW to a PoS mechanism. Other solutions include implementing carbon offset programs.