The Environmental Impact Of Cryptocurrency Mining

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The Environmental Impact of Cryptocurrency Mining
The Environmental Impact of Cryptocurrency Mining

These days a lot of people want to interact with the fast evolving crypto world, they often forget about a significant stumbling block: energy consumption during mining. Primarily, Bitcoin and Ethereum, the marquee players in the crypto realm, rely on mining with the second one moving to proof of stake consensus. However, alternate mechanisms exist to validate transactions and mint new coins.

Delve deeper into the conundrum of energy use in cryptocurrency mining, its environmental implications, and less energy-intensive alternatives that can be employed.

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Crypto Energy Expenditure

Estimations of energy consumption by cryptocurrencies, such as Bitcoin, can be derived from the network’s hashrate and the power usage of commercially available mining machines.

As an exemplar, Bitcoin, the most extensively mined crypto network, reportedly consumed approximately 99 Terawatt-hours (TWh) in April, 2023, equating to a significant fraction of global energy production, as per the Cambridge Bitcoin Electricity Consumption Index.

The second in command in the crypto universe, Ethereum, was estimated to require 62.77 Terawatt-hours of power annually back in July of, 2022, with each transaction necessitating 163 kilowatt-hours of energy. However that was before Ethereum network switched to Ethereum 2.0 which changed its energy requirements drastically.

Following Ethereum’s proof of stake transition in September 2022, energy requirements plummeted to 0.01 TWh annually, with each transaction demanding a mere 0.03 kWh.

The crypto sphere, with over 20,000 distinct cryptocurrencies and more than 500 exchanges, is vast. Assessments of energy consumption for these currencies do not account for the energy requisite for coin creation or service administration.

Assuming the continued oscillation of prices and user adoption, the energy footprint of Bitcoin mining will undeniably alter. As block rewards rise in value, so does the allure of mining, intensifying competition. Higher cryptocurrency values equate to higher energy demands from crypto networks.

The Energy Imperative in Crypto Mining

Far from a flaw, the energy intensity of crypto mining is a deliberate design feature. Bitcoin mining, the automated validation of transactions sans the need for trusted intermediaries like banks, is a prime example.

The transaction validation scheme is designed to rely heavily on energy — the network is underpinned by the computational prowess of thousands of mining machines. This reliance ensures the security of crypto blockchains employing proof-of-work consensus.

Environmental Repercussions of Crypto Mining

Quantifying the carbon footprint of cryptocurrency is a complex task. While fossil fuels dominate as the primary energy source in most crypto mining regions, miners inevitably gravitate towards the most cost-effective energy options.

For instance, Digiconomist reports that Turkmenistan, producing roughly 73 million tons of carbon dioxide annually, has a carbon footprint equivalent to the Bitcoin network. Prior to transitioning to proof of stake, when emissions dipped to 0.01 million tons, Ethereum was purported to generate an estimated 35.4 million tons of carbon dioxide emissions.

Countries Bearing the Brunt

The University of Cambridge researchers posit that the lion’s share of Bitcoin mining occurs in Kazakhstan, China, and the United States. The Center for Strategic and International Studies indicates that coal and crude oil make up about 75% of China’s energy consumption. China is responsible for 21% of the global hash rate. Kazakhstan is responsible for 18%, and U.S., mining constitutes 38% of all mining activities.

Consequently, three nations heavily reliant on fossil fuels account for almost 72% of global Bitcoin mining.

The E-Waste Issue

Mining cryptocurrencies inevitably leads to a significant volume of electronic waste due to the rapid depreciation of mining equipment. This is particularly true for Application-Specific Integrated Circuit (ASIC) miners, specialized hardware designed for mining the leading cryptocurrencies.

According to Digiconomist, the Bitcoin network alone contributes more than 38 thousand tons of electronic waste annually.

Can Cryptocurrency Mining Be More Energy-Efficient?

Large-scale Bitcoin mining operations often settle in regions with reliable, affordable, and plentiful energy sources. However, managing Bitcoin transactions and minting new coins need not always be energy-intensive.

Proof-of-stake (PoS), an alternative to the energy-guzzling cryptocurrency mining, is a transaction approval and new currency generation method that demands less computational power. The capacity of a validator to validate transactions and govern the crypto network is determined by the quantity of cryptocurrency they have “staked” or committed to refrain from trading or selling.

Emerging validation techniques, such as proof of history, proof of elapsed time, proof of burn, and proof of capacity, are also being developed. Ethereum’s creators decommissioned the blockchain’s proof-of-work mechanism, anticipating a 99.9% reduction in carbon emissions. No such ambition exists within the Bitcoin community. Mining, an energy-intensive practice and the most popular method of cryptocurrency creation, seems set to persist.