Is Crypto mining really affecting the environment?


After the CEO
of Tesla and SpaceX Elon Musk tweeted last week, that they
would not be accepting bitcoin as the payment mode for purchasing Tesla
vehicles, due to climate concerns—bitcoin plunged as
much as 17%.
Environmentalists and critics have concerns about the impact of
bitcoin on climate change. In 2021,
BBC reported that mining a
bitcoin takes 121 Terawatt-hours of electricity which is the annual consumption
of energy in countries like Austria, Argentina, and the Philippines.
What is cryptocurrency mining?
Cryptocurrency mining is the solving of complex computational
math problems using high-powered computers. The data are recorded to the blockchain,
the records
are shared by a network of devices that also take part in the mining
process.
The cryptocurrency is entirely different from the traditional
banking system, where there is a centralized system that approves each
transaction. Whereas, cryptocurrency operates in a decentralized
way, with a blockchain or
public ledger ranging across computers. Each transaction requires performing
cryptographic calculations.
Each miner can confirm/verify the transactions on the bitcoin
network by performing the calculations required to add new transactions,
instead, they get rewarded i.e bitcoin
for their computing work.
Is crypto
mining bad
for the
environment?
You might have heard of many success stories of individuals and
businesses because of their investments in bitcoin or other digital currencies.
However, you have been ignorant about the possible damage that these digital
currencies are causing the environment due to their high energy
consumption which is mostly from non-renewable resources.
Bitcoin mining requires specialized software called 'Application
Specific Integrated Circuits', powerful mining equipment that runs 24*7 to
effectively mine bitcoins.
The mining equipment goes obsolete very quickly, new equipment replaces the
old, slower machine’s—which adds to the e-waste. Bitcoin alone generates 8-12
thousand tons of e-waste annually, according to Digionomist.
It is estimated that a total of 36.95 Megatons of CO2 is
produced annually and in the next 3 decades, an estimated temperature increase of
2 degrees Celsius is possible due to this. A whopping 65 percent of miners are
based in China, which gets most of its energy from fossil fuels.
The annual consumption of power by bitcoin mining is 121
Terawatt hours of electricity, as reported by BBC. The environmentalists have
expressed their concerns on bitcoin being less efficient as the prices
increases since complex computational problems will be difficult to solve,
which increases the power consumption.
The enormous amount of energy used is to make the bitcoin
blockchain more secure—the more energy(electricity) spent to increase the
computational power, the more secure the blockchain becomes.
Is crypto mining good for the environment?
From purchasing a $1.5 billion worth bitcoin to taking a
'U-turn' on allowing cryptocurrency for the purchase of Tesla
vehicles--Billionaire Elon musk is now more concerned about the environmental
damages and increase of carbon footprint because of bitcoin mining.
But is Crypto mining affecting the climate Some experts
disagree.
"We believe that the opposite is true: a world with bitcoin
is a world that, at equilibrium, generates more electricity from renewable
carbon-free sources,” says Winston, director of research at ARK Invest in his blog post.
According to Winston, Bitcoin mining can help reduce dependence
on non-renewable resources by promoting more environmentally friendly
alternatives. He also argued that excess energy which is generated can be used
by bitcoin and ultimately help firms that deal with bitcoin mining become
profitable.
Bitcoin miners perform complex
calculations per second which require a maximum number of hashes per KW.
Renewable sources like solar and hydropower generate the highest hashes/kW of
electricity, which is required during the mining process-this
is another reason to hasten the shift to renewable energy.
Bitcoins require fewer infrastructural needs. If you consider
the traditional financial system, you will need a system of resources from
printing, money transportation, preventing frauds, and counterfeiting--it's a
lengthy process. Whereas in bitcoin, all it takes is a computer, internet, and
electricity. Also, bitcoin usage will stop our dependence on third-party
institutions like banks to process the transactions and will reduce the usage
of paper/metal currency.
Traditional currency encourages spending, whereas bitcoin is
profitable if saved, which will reduce unnecessary spending of the money at
your disposal. Saving your money in the bank will reduce its value over time
due to inflation, whereas bitcoins are valuable over time.
Moreover, we will start purchasing based on our needs, we can
reduce carbon footprint and protect our environment by less consumption of
non-essential items
Every innovation has a good and bad side to it. There's little
doubt that bitcoin uses a large amount of electricity for
mining. Even
though, many
experts in this field have urged that bitcoin uses renewable resources for most
of its energy needs. Ultimately it
depends on us to mine
cryptocurrencies in a responsible way to cause minimal damage to nature.

Pavan A
CBW - External Analyst
INDIA