How Does Cryptocurrency Impact Nature And Our Environment?

Climate change is a matter of great concern; and fossil fuels, farming, and industrial pollution are noted culprits. But cryptocurrency has recently entered the conversation. Much energy goes into mining cryptocurrencies like Bitcoin, especially, while the race among crypto millionaires to build the most powerful machine creates far more electronic waste.

So what is the environmental cost of cryptocurrencies? How does mining and transacting with crypto affect the environment? Let us find out in this article.

Energy consumption for cryptocurrency

Using the network's hash rate and the power consumed by commercial mining rigs, it is possible to estimate the energy usage by cryptocurrencies like enjincoin. In the latest estimates of country energy use for 2019, Cambridge University's Bitcoin Electricity Consumption Index shows that bitcoin, which is the most widely mined cryptocurrency network, used 85 Terawatt Hours (0.38%) of electricity and 218 TWh of energy at its point of production, more than Belgium and Finland.

According to cryptocurrency analytics sites, energy consumption through July 9, 2022, will be 130.3 Terawatt-hours. The average American household uses 1455.8 kilowatt-hours of electricity per transaction over 49.9 days.

Energy consumption for Ethereum through July 9, 2022, is estimated to be 62.77 Terawatt-hours, the same as Switzerland's. The typical Ethereum transaction consumes 163 kilowatt-hours of electricity, the same as a U.S. household for five days. The Ethereum team has created a proof-of-stake solution, but it's still in testing-of-stake, but it's still being tested.

As long as prices and user adoption are volatile, cryptocurrency mining will consume varying energy. Mining cryptocurrency gets more competitive as the block reward gets bigger, and crypto networks consume more energy when the price increases.

What's So Energy-Intensive About Cryptocurrencies?

Digital currencies are hard to mine and take much power so that no one can control them. Decentralization is why cryptocurrencies exist. 

Bitcoin works on a proof-of-work (PoW) system, which involves solving equations of varying difficulty to get new coins and add data to the Blockchain. These systems were developed to prevent cyberattacks where one person takes over the entire network by creating fake identities.

Having the most potent processor determines who wins since everyone competes to solve these equations first and earn money. Therefore, people build bigger mining rigs (or even networks of mining rigs) to process equations faster. Since mining new coins use much energy, the size of the mining network affects how much energy is used.

Electricity prices can also affect cryptocurrency mining. Mining operations can be centralized if electricity is cheaper in some countries (or parts). 

Cryptocurrency energy use and carbon emissions may be unrelated. Cryptocurrency mining will affect carbon emissions directly based on miners' energy sources. 

About 60% of U.S. energy comes from natural gas, coal, and petroleum. Most mining operations in the U.S. use fossil fuels to generate electricity. Even though Bitcoin uses much energy, it doesn't contribute to greenhouse gas emissions. 

Crypto mining power plants can also hurt the environment. At a Greenidge Generation plant in Dresden, New York, millions of gallons of water are pumped into Lake Seneca every day to cool it.

Cryptocurrency mining: Is it energy efficient?

Usually, big cryptocurrency miners are located in places with cheap, reliable, and abundant energy. Cryptocurrency transactions and minting new coins don't require much energy.

Proof-of-stake (PoS) allows cryptocurrency transactions to be validated and new coins minted without requiring much computing power. Instead, validation authority is granted based on how much cryptocurrency a validator "stakes" or agrees not to trade.

Another validation method is in development, which proves history, time, burn, and capacity. The Bitcoin developers don't want to retire the proof-of-work mechanism, but the Ethereum developers do. Since Bitcoin is the most popular crypto, mining will remain expensive and energy-intensive.

Does cryptocurrency help the environment?

Much energy is needed to power energy-intensive cryptocurrencies, special equipment, and waste-generating ones. Some of our fiat currencies and the current banking system aren't eco-friendly, but we have to consider the cost of gathering natural resources and using electricity.

What percentage of crypto is renewable?

Cryptocurrencies consume a significant amount of energy from renewable sources, but there isn't enough official information to determine this.

Summary

Blockchain has the potential to solve the environmental crisis and improve sustainability. Adopting emerging technologies like Blockchain requires a digital infrastructure upgrade, and regulations need to be adapted to help design the future energy systems as Blockchain develops.