CRYPTOCURRENCY THE ENVIRONMENTAL THREATS AND OPPORTUNITIES - AUGUST 2021 - BY ELISE BURDETTE - TRC Companies
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CRYPTOCURRENCY
THE ENVIRONMENTAL THREATS
AND OPPORTUNITIES
AUGUST 2021
BY ELISE BURDETTE
TRC MARKET ANALYST
CRYPTOCURRENCY – THE ENVIRONMENTAL
THREATS AND OPPORTUNITIES
Cryptocurrency (also known as crypto) is taking the fintech industry by storm, despite
the economic experts who still dismiss it as a viable form of currency. Even with a global
market cap of $1.34 trillion, cryptocurrency adoption is in the “early majority” stage. Bitcoin,
the credited original crypto, is by far the biggest in terms of adoption and market cap. There
were nearly 278 Bitcoin transactions made every second in January 2021 and more than
15,000 businesses worldwide currently accept Bitcoin as payment.
The proposed benefit of cryptocurrency is that, unlike most global currencies, it does not
depend on a single point of failure or the political whims of any government. Intermediaries
like banks are not needed for cryptocurrencies, as transaction ledgers are instead based
on decentralized technology. Central currency value is generally determined by the market
and regulation, whereas most cryptocurrencies are valued based on supply and demand. All
cryptos have a limited supply of digital coins to control scarcity and inflation, but demand
for them can greatly fluctuate causing price instability.
While cryptocurrency is often criticized for this volatility, whistleblowers are also further
shining a light on the severe toll that these digital currencies are taking on the environment.
As a result, cryptocurrencies like Bitcoin have been facing increasing pressures to go green.
HOW DOES A NON-PHYSICAL ASSET IMPACT THE ENVIRONMENT?
Unlike gold, acquiring cryptocurrency coins doesn’t
involve digging holes into the ground. The bigger
coins like Bitcoin operate under a so-called proof-
of-work (POW) protocol and are obtained through
mining. This entails solving difficult cryptographic
equations, which serve to validate the transactions
made with the currency.
Successful miners are rewarded coins as
compensation for their work. Presently, nearly
$200,000 worth of Bitcoin is awarded to the first
miner to solve each puzzle, and new computations
come out about every ten minutes. This makes
mining a lucrative and highly profitable business,
especially for large scale operations. Globally, it’s
National energy use in TW/h. Source: University of Cambridge estimated that there are over a million individual
Bitcoin Electricity Consumption Index miners competing tirelessly for rewards.
Solving these equations takes up massive amounts of computing power; this requires
specialized computers running 24/7 in order to keep the Bitcoin market churning. Large-
scale operations run data warehouses full of these computers. Naturally, enormous
amounts of electricity are required to keep these extensive computer networks running.
• The Bitcoin network has an annual energy consumption of 126 terawatt hours, which is
roughly equivalent to the annual energy consumption of Argentina.
• To record a single Bitcoin transaction, approximately 1,547 kilowatt hours is needed,
which is enough electricity to power the average US household for 53 days.
1WHAT’S POWERING THE BITCOIN NETWORK?
Currently, Bitcoin has a reputation for being less than clean when it comes to power usage.
Fossil fuels make up approximately 61% of the total energy consumption by the crypto’s
network. That’s equivalent to 77 terawatt hours per year. The remaining energy is fueled by
renewables, but that still leaves Bitcoin with a severe carbon footprint.
Source: Bitcoin Energy Consumption Index - Digiconomist
However, in a Cambridge University survey, over 76% of POW miners reported that they
want to use renewable energy sources; clearly, the lack of clean energy usage isn’t due to a
lack of interest.
In fact, cheap hydropower is in high demand for energy-guzzling mining operations, but
they struggle to gain and maintain access to this cleaner energy. To power all of Bitcoin
with hydropower, nearly 3% of the global hydro capacity would be required. This means
that many local dams would no longer be able to satisfy regional electricity demand, which
governments are not happy about.
China, in a recent push to control energy consumption, has banned Bitcoin miners from
direct access to Sichuan’s hydro dams. Similarly, a county in Montana declared that crypto
miners were siphoning too much energy from local dams and thus forcing the county to
meet its power demands with coal.
As a result, crypto mining operations seeking to go green will need to build their own
renewable power sources. US-based Gryphon Digital Mining raised $14 million this year to do
exactly that as they aim to be the first 100% renewable mining venture. It’s likely that other
mining companies follow suit, as environmental impact is becoming increasingly more
important in the minds of investors. For these solely profit-driven operations, carbon taxes
and high electricity bills will likely be motivation enough to push them towards cheaper,
cleaner energy. So, while Bitcoin mining right now is more dirty than desirable, it has the
potential to usher in a new wave of demand for renewable energy sources.
2A COMPUTATIONAL ARMS RACE
In the early years of crypto when one Bitcoin was worth mere pennies, the first adopters
could use their personal computers to mine. Now computers in the cryptocurrency network
are so specialized that they serve very little function outside of mining. Theoretically, one
could still use their laptop to try to mine, but it would be like a newborn racing against
Olympians.
Professional Bitcoin miners must constantly buy up the latest technology to even stay
competitive in this cutthroat space. With the rapid advancement in computing technology,
mining equipment becomes virtually obsolete every 18 months. Mining operations cannot
afford the electricity prices to keep nonprofitable equipment running; it’s more cost effective
to only run the newest computers and simply scrap the rest. This amounts to 10,948 tons of
electronic waste being dumped by the Bitcoin network every year.
Globally, only about 20% of e-waste is properly recycled, and the rest is sentenced to rust
away in landfills. A conservative back-of-the-envelope calculation estimates that the yearly
unrecycled Bitcoin e-waste contains over $2 million worth of precious metals. And these
computers also contain toxic materials like lead, cadmium, mercury and chromium, all
carcinogenic and not easily decomposed. Without interventions, these toxins can contaminate
soil and water near landfills. Recycling Bitcoin’s e-waste is not only a potentially lucrative
venture, but also necessary to mitigate cryptocurrency’s environmental impact.
3GREEN: THE COLOR OF MONEY
Bitcoin’s current model is hampered by its environmental and energy use implications, but
it’s teeming with potential. Despite its flaws, governments are rushing to figure out how to
tax Bitcoin — an indication that crypto isn’t going anywhere soon. This further emphasizes
cryptocurrency’s need to build the foundation for sustainability and environmental
responsibility. Efforts to help Bitcoin go greener will surely be daunting, but it could be
the catalyst for more renewable energy infrastructure and electronic recycling. This can
already be seen in countries like Iceland where Bitcoin miners flock to take advantage of
the abundance of clean, green (and cheap) geothermal and hydroelectric dams that power
the island. These mining operations contribute nearly $240 million to Iceland’s GDP, making
them welcome guests.
Cryptocurrency, by virtue, has always promised to shake the table. Bitcoin mining becoming
a driver for additional renewable investment is a less expected, yet highly exciting outcome.
Ultimately, Bitcoin’s substantial influence means that the effort to clean it up could have
the same impact as an entire country going green. The future of cryptocurrency has the
potential to spur incredible positive change, as a greener foundation helps pave the path to
a greener world.
ADDITIONAL RESOURCES
Barber, G. (2019). Bitcoin’s Climate Impact Is Global. The Cures Are Local. Accessed June 7, 2021 at
Bitcoin’s Climate Impact Is Global. The Cures Are Local. | WIRED
Blandin, A. et al. (2020). 3rd Global Cryptoasset Benchmarking Study. Accessed June 7, 2021 at
3rd Global Cryptoasset Benchmarking Study - CCAF publications - Cambridge Judge Business School
Criddle, C. (2021). Bitcoin consumes ‘more electricity than Argentina.’ Accessed June 7, 2021 at
Bitcoin consumes ‘more electricity than Argentina’ - BBC News
Digiconomist (2021). Bitcoin Energy Consumption Index. Accessed June 7, 2021 at
Bitcoin Energy Consumption Index - Digiconomist
Digiconomist (2021). Bitcoin Electronic Waste Monitor. Accessed June 7, 2021 at
Bitcoin Electronic Waste Monitor - Digiconomist
Forti, V. et al. (2020) The Global E-waste Monitor 2020. Accessed July 2 at
Global E-waste Statistics Partnership (globalewaste.org)
Harper, C. (2021). US Bitcoin Mining Venture Raises $14M for All-Renewable Energy Mining. Accessed
June 7, 2021 at Gryphon Raises $14M for All-Renewable Energy Mining in the US (coindesk.com)
International Hydropower Association (2021). Hydropower Status Report. Accessed July 2, 2021 at
Status Report (hydropower.org)
Reiff, N. (2021). What’s the Environmental Impact of Cryptocurrency? Accessed June 7, 2021 at
What’s the Environmental Impact of Cryptocurrency? (investopedia.com)
Wei, H. (2021) China Expels Bitcoin Mining to Reduce Energy Intensity. Accessed July 2, 2021 at
China Expels Bitcoin Mining to Reduce Energy Intensity | BloombergNEF (bnef.com)
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