The enthusiasm around cryptocurrencies could, given the right outlook, help drive alternative energy solutions and a reworking of some of the more harmful aspects of current crypto mining processes.
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One of the more unspoken, niggling consequences of being involved in the cryptocurrency business is the environmental impact of mining for more coins. It is first important to understand that there has been little to no public awareness on this matter, usually distracted by the prospects of digital wealth.
The more demand, the higher the price, but every now and then, the price bubble of this speculative asset bursts and plunges bitcoin prices steeply, only to rise again. The most recent crypto bubble burst happened when Elon Musk, who has over USD 1.5 billion invested in Bitcoin, reversed plans to accept bitcoin for payments for his vehicles.
Cryptocurrency is a good idea on many levels and we believe it has a promising future, but this cannot come at great cost to the environment.
This drove Bitcoin prices down by over 30%, an estimated USD40,000 per coin. Why would Musk take such a decision?
Most crypto-mining requires a computer system to be running at full tilt to complete complex calculations or mathematical puzzles with the coins being basically a reward for proof-of-work. To mine large amounts of Bitcoin, individuals and companies would need to invest in multiple processors of the highest spec, comprehensive cooling systems, and a large amount of consistent wattage. As the prices rise the complexity of the mathematical puzzles increase, which leads to a rising inefficiency in terms of mining.
Bitcoin is one of many cryptocurrencies currently in circulation around the world — it is also the highest valued. Currently the market value of Bitcoin stands at over 700 billion dollars, compared to the second ranked, Ethereum which is at 400 billion. While the rest of the coins fall much lower comparatively, there is already a significant amount of money invested in this digital economy.
Bitcoin alone demands a level of energy consumption of over 120 Terawatt-hours, which is almost half of that of the United Kingdom — higher than the energy consumption of Argentina, Ukraine, Sweden, Norway, or even Qatar. Other cryptocurrencies however show much lower energy consumption rates, the most demanding of them almost 7 times lower than that of Bitcoin.
Not surprisingly, barely 39% of the energy consumption in mining comes from renewable sources, with the rest coming from nonrenewable sources such as the burning of fossil fuels.
It has been hypothesised that current trends in mining will lead to a two degree celsius increase in global temperatures over the next three decades. This is not only worrying but also damning in terms of environmental impact. Unsurprisingly however crypto miners defend themselves vehemently.
Some companies have even invested in resurrecting old, abandoned power plants with their own mix of renewable energy inputs, to conduct intensive mining. They then buy ‘carbon credits’ from other countries as a way to make up for the impact, but Mandy DeRoche, an attorney at Earthjustice, says buying credits is “irrelevant” considering the amount of greenhouse gases emitted, and that it is already time to look at the matter a lot more seriously.
People can get distracted by, like, ‘what is bitcoin and what does it do?’ Honestly I don’t care what bitcoin does. I care that it is hugely energy-intensive, and that there are maybe better ways to go about bitcoin mining than this very inefficient, very energy-intensive process.
Supporters, however, remain unperturbed. They posit that this method of rushing to mine more bitcoin provides urgency for scientific research on renewable energy, and that the benefits outweigh the costs — also arguing that cryptocurrencies provide the basis for the financial system of the future. Jack Dorsey’s Square and Cathie Wood’s Ark Investment have both claimed that “Increasing bitcoin mining capacity could allow the energy provider to ‘overbuild’ solar without wasting energy.” A memo released by Square and Ark seems to outline that when Bitcoin miners demand electricity, energy initiatives become profitable for investors as more developments would take place.
Other reports go further to point out existing banking systems use more energy per annum than Bitcoin mining, which, while true on paper, ignores the entire current concept of banking. Banks, ATMS, and other financial facilities do not individually demand the same amount of power per mining system, and to completely switch to cryptocurrency usage as an everyday tool will not be possible without years of effort.
Ethereum, however, has begun switching over from Proof-of-Work consensus mechanism, to Proof-of-Stake. This concept is highly technical, with the key difference being lesser demand on power and computation.. However this is not without its technical challenges and only time will tell if this could wind up being the evolution that levels the playing field.
Bitcoin mining can definitely be done sustainably, and it wouldn’t be a farfetched idea to utilise the uninhabited islands in the Maldives to do so. By using the natural coolant that is the ocean, and waves & tidal energy in addition to solar energy as a power source a complete renewable energy proof-of-concept could bolster mining with minimal impact on the environment.
It isn’t much of a stretch to assume bitcoin mining companies might seriously invest in the economy to make more efficient and higher yielding facilities, and this could be something that the government could explore — the potential to showcase a one of its kind renewable energy project alone should be reward enough.
