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The Surge of Cryptocurrency and Its Carbon Footprint

Over the past decade, there has been a widespread rise in the use and intrigue of cryptocurrency, showing no indication of slowing down. Cryptocurrency is a form of digitized money, with notable companies including Bitcoin and Ethereum, with Bitcoin particularly surging in value in early 2021. This, however, is not without its environmental drawbacks. As the cryptocurrency industry gains traction and expands, so does its carbon footprint. 

Many forms of cryptocurrencies make use of what is called the “blockchain.” The blockchain functions as a database made up of consumer transactions, with each transaction making up a block, with multiple transactions stringing together like a chain. The information is encrypted, then secured by a process referred to as “mining.” The process of mining adds more blocks to the chains, furthering the security of the entire blockchain. Mining uses computers to solve mathematical problems that verify and add transactions to the chain which creates new Bitcoins. Mining is extremely technology and resource-intensive, with electricity making up 60% of mining costs. The energy use of Bitcoin also likely surges when the price of Bitcoin increases, as more people are monetarily incentivized to mine. Current estimates have Bitcoin using roughly 77 to 108 Terawatt-hours (TWh) of energy with a possible trajectory of 184TWh.  That is roughly equivalent to the datacenter energy use of all other digital industries. With each kilowatt-hour of energy consumed, 480-500g of carbon dioxide is generated. To contextualize this, a singular Bitcoin transaction produces the same amount of carbon dioxide as 706,765 swipes of a Visa card.

The increase in popularity of Bitcoin has created the need for a highly specialized computer rather than a typical laptop. In December of 2020, Marathon Digital Holdings, a cryptocurrency mining company, purchased 70,000 application-specific integrated circuit (ASIC) miners. These “fleets” of miners heavily contribute to the massive carbon footprint of Bitcoin. Bitcoin mining alone is anticipated to make up 0.6% of energy consumption globally. Additionally, it creates carbon dioxide emissions equal to the country of Jordan at over 22 million metric tons of CO2, with the possibility of reaching over 90 million metric tons.

Though the energy and carbon footprint of Bitcoin and other cryptocurrencies remain large, there is a growing movement towards implementing sustainable energy sources. Roughly 73% of miners use some renewable energy, such as hydropower; still, only 39% of the power consumed comes from renewable energy and 38% of cryptocurrency power comes from coal. Some power comes from what would be considered energy waste, such as oil from a leak, meaning that the miners used otherwise unusable energy. A new approach has come from the city of Norilsk in Russia. The city is known for mining ore but has begun mining for cryptocurrency, with a farm created from scrap metal. The cold Arctic location also provides benefits for Bitcoin mining by cooling the farm. The farm additionally makes use of hydropower; however, they still use some natural gas. 

To combat the non-renewable energy consumption, Energy Web, the Alliance for Innovative Regulation, and the Republic of the Marshall Islands have constructed the Crypto Climate Accord. Over 20 companies joined the accord as part of the initial supporters, with the most recent joiners being Ripple, Coinshares, ConsenSys, and many United Nations (UN) “climate champions,” who are appointed by the UN to support and advance climate proposals.. The Accord’s goal is quite ambitious, aiming for crypto to run fully on renewable energy by 2025, with net-zero emissions by 2030. Furthermore, the Accord aims to create an accounting system to more easily and accurately measure the emissions produced by cryptocurrency, as well as design a verification system for renewable energy consumption by the various blockchains, to hold crypto-companies accountable and raise transparency. The largest hurdle for the Crypto Climate Accord is Bitcoin. The structure for Bitcoin mining is deliberately inefficient, to reduce the amount of currency that can be mined within a period of time. They require significant hardware and time for little payout to limit the amount of Bitcoin that can be mined and put into the crypto-economy, meaning only sizable operations can be profitable for the miner. Due to this, Bitcoin mining operations are intentionally set up in low-energy cost areas with low to no carbon taxes, such as China. In order to use more renewables, Bitcoin and other cryptocurrencies would need to move out of these areas. Unless Bitcoin changes its mining model, the Crypto Climate Accord will not be able to accomplish all it has set out to achieve.

The cryptocurrency industry, though relatively new, poses serious concerns about its climate impact. With the expansion and development of new and existing crypto, the future looks bleak. Major players such as Bitcoin and Ethereum will need to change their methods and opt for higher renewable energy usage. The Crypto Climate Accord offers some hope, but the issue necessitates a bigger push towards a lower footprint.

 

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