Cryptocurrency is way past being just a buzzword today. With a market cap of over $1,046 billion, it’s now an industry itself. The industry is primarily dominated by Bitcoin (BTC) and Ethereum (ETH) – and it has seen a meteoric rise in value and popularity since its inception over a decade ago. It is used by businesses, in virtual real estate, as a mode of payment, and as an investment vehicle.
While the rise of cryptocurrency has been nothing short of extraordinary, it isn’t without problems. The environmental impact of cryptocurrency mining has come under scrutiny in recent years as the industry has grown. A single Bitcoin transaction can use a staggering 1,455 kWh! This is equal to the energy that an average American household uses in 50(!) days, according to the Digiconomist’s Bitcoin Energy Consumption Index.
The good news is that there are many ways in which crypto miners and traders can reduce the environmental impact of cryptocurrency. Check them out below.
What is cryptocurrency mining?
Cryptocurrency mining is a process by which new coins are created. Miners are rewarded for their work with cryptocurrency – the more they mine, the more they earn. However, mining is a very energy-intensive process. It significantly contributes to an increase in global emissions and environmental damage.
The problem with cryptocurrency is that it is decentralized, meaning there is no one entity in charge of it. There’s no one to regulate its energy consumption or set standards for how it should be used. In fact, even the source of the cryptocurrency mining power is largely unregulated.
A large chunk of Bitcoin mining takes place in China, where most of the country’s energy comes from coal-fired power plants. These plants are some of the most polluting and carbon-intensive in the world. And it costs an estimated $25,000 to mine a single Bitcoin in the country.
In comparison, it costs approximately $21,000 to mine BTC in the United States. But in Venezuela, it costs a whopping $245,000 to do so! These costs stem from the energy prices when mining a single cryptocurrency.
But what makes cryptocurrency mining so energy-intensive? Several hundred and even thousands of machines validate each cryptocurrency transaction. Thus, the security of a cryptocurrency blockchain relies solely on these machines.
By using hundreds of machines, the industry is responsible for more than 70 million tons of carbon dioxide emissions every year. As the industry continues to grow, its impact on the environment may only worsen. Thus, there is a need to find ways to minimize its environmental impact.
1. Use renewable energy to power mining operations.
Renewable energy is a key part of the solution to climate change, and it can also be used to power cryptocurrency mining operations. Some companies are already doing this. For example, Greenidge Generation Holdings, a New York-based company, runs a carbon-neutral bitcoin mining operation. The company makes use of carbon offsetting strategies as well as low to zero-carbon sources to maintain what they call responsible Bitcoin mining.
By using renewable energy, other companies can follow suit in reducing the global environmental impact of their cryptocurrency mining operations
2. Improve energy efficiency.
Another way to reduce the environmental impact of cryptocurrency is to improve the energy efficiency of mining operations. This can be done in several ways, such as using more efficient mining hardware or using cooling systems to reduce wasted heat. Additionally, the use of solar panels to power mining operations is a cost-effective and efficient way to improve energy consumption.
3. Use less energy-intensive cryptocurrencies.
Not all cryptocurrencies are created equal when it comes to energy use. Some, like Bitcoin, are much more energy intensive than others because it goes through the traditional cryptocurrency mining process. Ethereum, for example, is estimated to be about 20 times more energy efficient than Bitcoin. So, if you’re interested in investing in cryptocurrency, consider investing in ones that are less energy intensive.
4. Recycle used hardware.
Cryptocurrency does not only contribute to an increase in global energy consumption, but it also contributes to a lot of electronic waste that ends up in landfills. When mining hardware becomes obsolete, it is important to recycle it rather than throwing it away. To do this, cryptocurrency mining companies can forge partnerships with recycling centers around the world to ensure that their used hardware is properly recycled.
5. Advocate for regulation.
One of the best ways to reduce the environmental impact of cryptocurrency is to advocate for government regulation. Regulation can help to set standards for energy use and ensure that mining operations are using renewable energy. It can also help to hold companies accountable for their environmental impact.
Many cryptocurrency miners frown upon regulation because it may limit their profits. However, if the future of cryptocurrency is in sustainability and efficiency, it is necessary to advocate for it and not against it. Profits will soon become useless if the planet becomes uninhabitable.
The cryptocurrency industry has a long way to go in terms of reducing its environmental impact. But some things can already be done today to make a difference. By using renewable energy, improving energy efficiency, and investing in less energy-intensive cryptocurrencies, we can help to reduce the industry’s impact on the planet.