Does Crypto Really Have An Impact On Climate Change?

This article looks into the correlation between Bitcoin's energy consumption and the impact it may or may not have on climate change.

Bitcoin Energy And Climate Change

The most polluting “proof-of-work” cryptocurrencies, like Bitcoin, Ethereum & Dogecoin, together use around 300 terawatt-hours (TW/h) of mainly fossil-fuelled electricity each year. Bitcoin has an annual carbon footprint of around 114 million tonnes. That’s roughly comparable to 380,000 space rocket launches, or the annual carbon footprint of the Czech Republic.

Proof-of-work mining can be thought of as a controlled way of wasting energy. The process involves specialist computers repeatedly taking random shots at guessing a long string of digits. The amount of computing power dedicated to this effort is referred to as the network’s hash rate.

If the hash rate drops for any reason, because of power cuts or price dips, for example, the difficulty of the guessing game is automatically adjusted to ensure the network can find a new winner every ten minutes. Each winner then gets a go at verifying transactions occurring on the network and is awarded 6.25 newly minted bitcoins.

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Solutions Are Already Here

Currently, fossil fuels power about 60 percent of Bitcoin mining. In 2021, a group of more than 150 crypto companies signed the Crypto Climate Accord, in which they promised to reach net-zero emissions by 2030 through both switching over to renewables and purchasing offsets. But offsets often come with big asterisks on their true effectiveness at preventing carbon emissions and renewable energy could be better used for essentials, such as powering homes or transporting food.

Some countries—like China, where the majority of mining took place before the government ordered the facilities to close last year—have clamped down on the industry, but operations simply moved to countries with cheaper energy and fewer rules.  Right now, most cryptocurrencies remain unregulated as financial assets under the U.S. Securities and Exchange Commission (SEC).

Cryptocurrencies could also shift away from their current energy-intensive method of verifying transactions–from what’s currently dubbed a “proof of work” model, which pits computers against one another in a race to win coins, to a “proof of stake” model, which doesn’t require continual competition and significantly cuts down on energy use.

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Eco-Friendly Cryptocurrencies

Many more lesser-known cryptocurrencies exist, and they hope to break into the ever-growing crypto market with an emphasis on sustainability that rivals Bitcoin and Ethereum. One of those is Cardano, created by the co-founder of Ethereum, with the ability to process 1000 transactions per second compared to Bitcoin’s 7. Cardano has the third-largest capitalization in the cryptocurrency market. It has slowly been adopted by a few other platforms including NFT marketplaces, which with the growing popularity of the NFT scene could mean great things for the future of the currency. Cardano does all of this on the basis of sustainable, proof-of-stake technology that makes it one of the most popular green cryptocurrencies today.

On the bright side, Ethereum currently plans on transitioning to a proof-of-stake consensus this year in an event called "The Merge".  Transitioning the Ethereum blockchain to POS will save a considerable amount of energy.

Other green cryptocurrencies include:

• Nano (NANO): has one of the lowest carbon footprints

• Stellar (XLM): used by IBM, Nigeria, France, and India

• SolarCoin (SLR): gives users SolarCoins in return for using solar energy

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These coins are just the tip of the iceberg. The future of cryptocurrency looks promising, especially with the new emphasis on sustainability being followed even by industry leaders like Ethereum. It’s a welcome change that not all cryptocurrencies today are harming the environment--some are even helping.

Additional reading:

Four Environmental Cryptocurrency Myths Debunked