Cryptocurrency is a digital currency that can be used to buy goods and services. To secure transactions, it uses blockchain technology, which is essentially a gigantic database of information that cannot be altered or tampered with.
There are lots of different cryptocurrencies around — Dogecoin, Ripple, Ethereum, etc — but Bitcoin is the most popular. It was the first decentralised cryptocurrency introduced in 2009. Bitcoin has inspired hundreds of imitators, but it remains the largest cryptocurrency by market capitalisation.
Public blockchains like Bitcoin are extremely transparent. The nature of blockchain technology means that all of the data is immutable, traceable and permanent, meaning anyone can see the balance and transactions of any wallet address. Nobody, not the government, not even advanced hackers can challenge, alter or delete what you own on the blockchain.
In the world of cryptocurrency, ‘mining’ is done by complex high-powered computers. Bitcoin miners run complex computer rigs to solve complicated mathematical puzzles, called proof-of-work (PoW), in an effort to confirm groups of transactions called blocks; upon success, these blocks are added to the blockchain record and the miners are rewarded with a small number of Bitcoins. Other participants in the Bitcoin market can buy or sell tokens through cryptocurrency exchanges or peer-to-peer.
Bitcoin has been booming and its price exceeded $60,000 in October 2021, but its use of computer hardware and energy is huge. Here are some of the reasons why Bitcoin is bad for the environment.
To quote Elon Musk, “Energy usage trend over past few months for cryptocurrency is insane.” Musk was referring to the amount of energy required for the creation of “mining” of Bitcoin, which is mined by high-powered computers that compete to solve complex mathematical puzzles in an energy-intensive process. This process, in most cases, often relies on fossil fuels, particularly coal.
To put things in perspective, Deutsche Bank analysts estimated that if Bitcoin was a country, it would use about the same amount of electricity a year as Ukraine.
In March 2021, Bitcoin’s electrical footprint was a little over 75 per cent of Netherlands’ entire energy production and about 9 per cent of that of Russia. Similarly, there are various other researchers that claim how disastrous the virtual coin is to the environment. According to reports, one Bitcoin transaction takes 1,544 kWh of energy, which is equivalent to the power that can keep an average US household running for 53 days.
With the high energy consumption, the virtual currency’s mining produces a large amount of e-waste (electronic waste).
As the life span of the devices that Bitcoin miners use is only about 18 months, a lot of hardware is used quickly and eventually becomes e-waste. The researchers claim that the e-waste produced by Bitcoin per year (24 kilo tonnes) is equivalent to that produced by the Netherlands.
Bitcoin mining consumes a humongous amount of energy which leads to a bigger carbon footprint with every passing year. As the value of Bitcoin increases so does its mining, which means the puzzles become more complex and the companies invest in computing power.
While Bitcoin has been criticised for long for its negative environmental impacts, its defenders still say a switch to renewable sources would reduce its carbon emissions. But the truth is, Bitcoin still uses a colossal amount of energy.
Cryptocurrencies need to be more sustainable. They cannot ignore environmental considerations if they want to gain wider adoption, and that newer and greener cryptocurrencies will eventually eclipse Bitcoin.
The writer is founder of Smiling Tree