Sep. 28, 2021
Dogecoin, Ethereum, and numerous other cryptocurrencies have risen to the heights many investors thought to be impossible during the pandemic, according to a recent piece in the Wall Street Journal. But this surge in popularity doesn’t come without its drawbacks. Experts are raising concerns regarding crypto’s environmental impact, and it’s linked to how the coins are “mined.”
Cryptocurrency’s decentralized structure, the same structure Bitcoin and Ethereum follow, may be the driving factor of its huge carbon emissions footprint, according to Cambridge University. To verify transactions, decentralized consensus mechanisms require computers to solve complex math problems that the cryptocurrency world refers to as a “proof-of-work” system. This system is severely more energy-intensive than verifying transactions on centralized networks.
How much more energy-intensive? A BBC report in 2021 discovered that Bitcoin uses a massive 121 Terawatt-hours of electricity every year. For comparison, that’s equal to Argentina’s usage (121 TWh), and more than the Netherlands (108.8 TWh), and the United Arab Emirates (113.20 TWh). Bitcoin’s energy consumption is not the only negative impact on the surrounding environment. A Bank of America report discovered that Bitcoin alone produces more carbon emissions than American Airlines, ConocoPhillips, Coca-Cola, and Nike. Francisco Blanch, head of commodities and derivatives research at Bank of America and lead author, stated his concerns. “What I’m concerned about is the pace of growth in the demand for energy is enormous.”
Bitcoin’s carbon footprint may be larger than some airline and gas companies, however, there are alternative cryptocurrencies that have a very negligible environmental impact. This is because they don’t require mining. Proof-of-stake blockchains, like Cosmos and Polkadot, allow transactions to be processed with the same energy consumption as an ordinary computer by attributing mining power based on the percentage of coins held.
Bitcoin and other proof-of-work blockchains use tremendous amounts of non-renewable energy produced from burning coal and other fossil fuels. These emissions are direct causes of negative effects on the environment. Cryptocurrency advocates argue that renewable energy sources play a major component, but even the best-case scenarios indicate that mining is a crucial factor in carbon dioxide emissions.
This raises ethical and resourcing issues. Cryptocurrency may be an emerging technology and a popular topic of conversation, but one can’t forget the real-world implications.
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