Crypto Emissions: A Growing Climate Problem?
Are emissions from the crypto industry a global issue?
The worldwide energy market has been in turmoil for many years. Several European countries, the United States, China, India, and South Korea, are among those worst hit by the ongoing energy crisis. This crisis is a culmination of several issues, the chief of which is the sharp reduction in the use of oil and electricity during the early stages of the COVID-19 pandemic.
This led oil and gas companies to limit the production of these resources. However, these companies did not anticipate the global market to recover so quickly from the pandemic. Factor in the Russia-Ukraine War, climate change, greenflation, and geopolitics, and we are in the middle of an unprecedented energy crisis. You must be thinking, what is this to do with cryptocurrencies and crypto emissions?
Crypto emissions from crypto mining are a problem
Today’s total crypto market cap is nearly $800B. Yes, billion. The most popular cryptocurrency, Bitcoin (BTC), boasts a market cap that is almost 40% of the market's total value! BTC is one among 19k+ potential cryptocurrencies generated on the Proof of Work (PoW) consensus mechanism.
This 'generation' takes place through crypto mining, a costly, time-consuming, energy-consuming, and rewarding (potentially) process. It involves sophisticated hardware and solving complicated computational maths problems. The 'energy-consuming' component of cryptocurrency mining is the real problem.
Crypto mining consumes an ENORMOUS amount of energy. The annualised consumption of BTC alone is 88.87 TWh, with an upper limit of 125.93 TWh! That is around 10% of the total energy consumption of countries like South Korea, Brazil, Germany, and Canada, and much more than Austria as a whole! Now that we have established the amount of energy Bitcoin alone consumes through Bitcoin mining, imagine the total energy consumption of all cryptocurrencies.
Also, imagine the massive carbon footprint of crypto. Now that is what is hurting the climate.
The carbon footprint of crypto emissions
Earlier this year, Ethereum too was a PoW chain. However, the change from PoW to the consensus mechanism of Proof of Stake (PoS), The Merge, on 15 September, 2022, led to a reduction in energy consumption by nearly 99.95%!
Unfortunately, a move to the PoS model is not viable for Bitcoin. Bitcoin serves as a store of value, much like traditional assets such as gold and silver, and has fundamentals enabling the decentralisation of the chain securely. Moving to the PoS mechanism would undermine the very purpose of the crypto asset and would not be permitted by the Bitcoin mining community anyway. The six largest Bitcoin mining pools control nearly 95% of the resources on the chain–the irony!
Let us talk numbers. What impact do crypto emissions led by BTC really have on the environment? Bitcoin's carbon footprint increased a mammoth 126 times between 2016 and 2021. During this duration, Bitcoin-led crypto emissions caused global climate damages worth an estimated $12B. According to Benjamin Jones, University of New Mexico Assistant Professor of Economics,
“We find no evidence that Bitcoin mining is becoming more sustainable over time.”
According to him, Bitcoin-led crypto mining is becoming “dirtier” and even more “damaging to the climate”. In 2021 alone, Bitcoin-caused crypto emissions resulted in 113 metric tonnes of carbon dioxide on average, PER COIN MINED. If we assume one metric tonne of carbon dioxide causes $100 worth of climate damage, each BTC mined led to $11.3k worth of environmental damage (researchers used similar figures). Ouch.
As long as non-renewable resources like coal are used to fuel crypto mining operations, crypto emissions will be a climate problem and an ever-growing one. So is a change to PoS for all PoW chains the answer to reducing crypto emissions for other cryptocurrencies? Changing from one consensus mechanism to another is not easy.
It is a very time-consuming and complicated procedure.
To put it into perspective, the original date for 'The Merge' was January 2020! The Ethereum community waited more than two years for the change.
Ethereum is backed by the strongest community in crypto and boasts of some of the best talents, led by the charismatic and brilliant Vitalik Bueterin. A change to PoS is not the solution. While cryptocurrencies of the future should look away from the PoW model, for current PoW chains, the solution is a move to green mining. This will help drastically reduce crypto’s carbon footprint.
A move to green mining will help address the issue of crypto emissions
I'd be lying if I said there are no mining rigs that have turned to green energy sources for crypto mining. Texas, for example, produces the most renewable energy in the US, powered by solar and wind farms. A crypto mining data centre in West Texas, called HODL Ranch, is taking full advantage of the ferocious gusts in the region and mining BTC at the cost of just $2,000 per coin! On today's market, that is a profit of over $14,000 per coin. Insane.
Crusoe Energy Systems has raised $250M to mine Bitcoin in states including Texas, New Mexico, and Dakota.
This green mining gamble will be fuelled by natural gas that would have either been flared or burnt off. The Scrubgrass Generating power plant in Pennsylvania combusts gob (coal waste) to mine Bitcoin, earning significantly more from mining than selling to the power grid–nearly 15 times more. These are just a few examples from the US.
Several players all over the globe are turning to green mining to reduce crypto emissions or maximising existing waste to good effect. The problem is that at the current rate of carbon emissions per BTC mined, the green mining initiative of today just is not enough. We need a more drastic change soon.
The fact is that the above-listed 'organisations' can afford to use green energy or combust waste material. Other crypto and Bitcoin miners will always choose the cheapest available fuel source. Dirty fuels like coal will remain cheap for the foreseeable future, and this will prohibit a green revolution.
Banning crypto mining will not solve the issue either. China banned cryptocurrency mining last year, leading to miners fleeing to countries such as the US and Kazakhstan, where they sourced energy for mining from coal power and gas. We have to enforce a change for the betterment of the climate.
It is no longer why but how. How do we enforce a global green mining revolution? How soon can we significantly reduce crypto emissions? We are harming the environment by the day. It is time for the cryptoverse to stand as one and work towards a common goal - a green planet.
Author: Surajdeep Singh
Surajdeep Singh has been working in the tech sphere as a marketing guru and journalist for over 6 years, with his speciality laying in blockchain and Web3. He has donned several hats in marketing and journalism over the years and worked with many reputable brands. Feel free to reach out to him on LinkedIn!