Cryptocurrency's Dark Side: Energy Consumption And Environmental Impact

The rise of cryptocurrency has prompted huge investments in the sector, with digital currencies winning the faith of top investors. However, the process of mining cryptocurrencies has been found to have major environmental impacts on climate, water, and land. Cryptocurrency mining requires a lot of electricity, and most of the time, this electricity is created by burning fossil fuels, which releases tons of carbon emissions and pushes us closer to a planet unfit to sustain life. The energy consumption of cryptocurrency mining threatens to undermine progress towards achieving climate goals, and there are concerns about its water and waste footprints.

Bitcoin mining uses more electricity than some small countries

Bitcoin mining is an energy-intensive process. It involves powerful computers solving complex mathematical puzzles to validate transactions on the blockchain. In 2020-2021, Bitcoin mining consumed 173.42 terawatt-hours of electricity, enough to rank it 27th among nations in terms of electricity consumption, surpassing countries like Pakistan with a population of over 230 million people.

The energy used for Bitcoin mining often comes from fossil fuels, contributing to a substantial carbon footprint. In 2020-2021, 67% of the electricity consumed for Bitcoin mining was produced from fossil fuels, with coal providing 45% of the overall electricity used globally during this period. This has led to concerns about the environmental impact of Bitcoin mining, with some countries, like China, imposing restrictions on the practice.

The high energy consumption of Bitcoin mining has also resulted in increased demand for power, impacting local power grids and contributing to emissions. Additionally, the process produces thousands of tons of e-waste annually.

While some argue that crypto mining can encourage the development of renewable energy projects, the reality is that renewable energy sources currently provide only a small proportion of the electricity used for mining. For example, between 2020 and 2021, renewables like solar and wind provided a minor share of the electricity used for mining.

The environmental impact of Bitcoin mining has led to a search for alternative validation methods. The Ethereum network, the second-largest after Bitcoin, has transitioned to a new mechanism where transactions are approved by people who voluntarily lock up their cryptocurrency, reducing energy consumption by 99%. Other methods, such as proof of history, proof of elapsed time, proof of burn, and proof of capacity, are also being explored to reduce the energy intensity of cryptocurrency mining.

Crypto mining increases local air, water, and noise pollution

Crypto mining, particularly the proof-of-work method, has been associated with increased air, water, and noise pollution in communities across the United States. The process of mining cryptocurrencies consumes vast amounts of energy, often relying on fossil fuels, which contributes to air pollution and climate change.

A report by the Environmental Working Group (EWG) highlights the detrimental effects of proof-of-work crypto mining on the environment and communities. It reveals how these mining operations create constant noise, blighting neighbourhoods and causing distress to residents. For instance, a Blockstream mining centre in Adel, Georgia, produced excessive noise that led nearby residents to spend thousands of dollars on 11 layers of insulation to mitigate the constant din that was damaging their hearing.

Crypto mining also impacts water resources. A United Nations University study found that Bitcoin mining activities have significant water and land footprints, in addition to their substantial carbon footprint. The study, which examined 76 Bitcoin mining nations in 2020-2021, revealed the hidden environmental impacts of this popular cryptocurrency.

The energy-intensive nature of crypto mining strains energy grids and raises electricity rates. In the year before July 2022, Bitcoin consumed an estimated 36 billion kilowatt-hours of electricity in the United States alone. This surge in energy demand has led to the revival of defunct coal and gas plants, increasing local air pollution and total carbon emissions.

Some jurisdictions have considered or implemented bans on proof-of-work cryptocurrency mining to mitigate these negative impacts. However, there are alternative methods available, such as proof-of-stake, which Ethereum has adopted, reducing energy usage by 99% compared to the proof-of-work system.

Crypto mining uses fossil fuels, increasing carbon emissions

Crypto mining, especially Bitcoin mining, uses fossil fuels, increasing carbon emissions and contributing to global warming. Bitcoin mining emitted over 85.89 Mt of CO2 during the 2020–2021 period, with coal providing 45% of the overall electricity used for Bitcoin mining globally during this period. The energy consumed by Bitcoin mining is more than is used by some small countries, and the cryptocurrency's carbon footprint is substantial. In fact, the greenhouse gas emissions of Bitcoin mining alone could be enough to push global warming beyond the Paris Agreement's goal of holding anthropogenic climate warming below 2 degrees Celsius.

The high energy consumption of Bitcoin mining is due to the process requiring a lot of electricity to power the high-powered equipment used to "mine" crypto assets. One Bitcoin transaction requires roughly the same amount of electricity as the average person in Ghana or Pakistan consumes in three years. Crypto mining and data centres now account for 2% of global electricity use and nearly 1% of global emissions, and this figure is expected to grow.

The large carbon footprint of Bitcoin and other cryptocurrencies has led to concerns about the industry's impact on the environment. UN scientists have evaluated the environmental impacts of Bitcoin worldwide by examining the activities of 76 Bitcoin mining nations during the 2020–2021 period. They found that, in addition to a substantial carbon footprint, global Bitcoin mining activities have significant water and land footprints.

While some argue that crypto mining encourages the development of renewable energy projects and will revolutionize the energy grid, others point out that renewable energy developers need customers to grow, and proof-of-work miners provide exactly that. As an example, wind farms in Vermont have no ability to sell their energy due to their remote locations and the lack of transmission lines.

Crypto mining produces thousands of tons of e-waste

The process of mining cryptocurrencies, especially Bitcoin, has been associated with a range of environmental concerns, including its substantial carbon footprint and significant water and land footprints. However, one of the less discussed issues is the generation of thousands of tons of electronic waste (e-waste) each year.

Bitcoin mining is done using specialised hardware, which becomes obsolete approximately every 1.5 years. This short lifespan is due to the competitive nature of Bitcoin mining, where only the most powerful hardware can win the race to mine new Bitcoins. As a result, miners are constantly upgrading their equipment, rendering older versions useless. The single-purpose nature of the hardware means it cannot be repurposed for other tasks, immediately becoming electronic waste.

The frequent updates and advancements in ASIC chip efficiency result in more powerful devices that eventually crowd out older, less efficient technology. The moment these devices become unprofitable, they reach the end of their lifespan and contribute to the growing e-waste problem. The rate at which these devices become obsolete has not been extensively studied, but it is estimated to be around 1.5 years.

The issue of e-waste is not unique to Bitcoin mining, but its impact is significant. In 2019, the world generated approximately 53.6 million metric tons of e-waste, with only 17.4% of it being recycled. The amount of e-waste is expected to double by 2050, and this projection does not even take into account the potential impact of Bitcoin mining. The exact amount of e-waste generated by Bitcoin mining is challenging to determine due to a lack of high-quality data, but it is estimated that each Bitcoin transaction produces about 135 grams of e-waste.

While some may argue that other cryptocurrencies, such as Solana and Avalanche, use less energy-intensive processes, the dominance of Bitcoin in the market means its impact on e-waste cannot be overlooked. With a market share of almost 70% as of 2021, the environmental consequences of Bitcoin mining, including its contribution to e-waste, are significant.

Crypto mining threatens to undo progress made towards climate goals

The massive energy consumption of cryptocurrency mining, particularly Bitcoin, threatens to undo decades of progress made towards achieving climate goals. The process of mining Bitcoin, which involves safeguarding the Bitcoin network, uses more power globally per year than most countries. The energy-intensive process often relies on cheap electricity, which is usually generated by burning fossil fuels, leading to increased carbon emissions.

A study by United Nations scientists evaluated the environmental impacts of Bitcoin across 76 mining nations during 2020-2021. The study found that global Bitcoin mining activities have a substantial carbon footprint, as well as significant water and land footprints. The findings revealed that 67% of the electricity consumed for Bitcoin mining during this period was produced from fossil energy sources, with coal providing 45% of the overall electricity used.

The surge in the crypto market has led to an explosive growth in cryptocurrency mining, particularly in the United States after China banned the practice in 2021. This growth has strained energy grids, increased electricity rates, and contributed to local air pollution. Cryptocurrency mining operations have shown a preference for readily available energy and minimal regulation, restarting defunct coal and gas plants, and tapping into power grids.

The environmental impact of cryptocurrency mining has raised concerns among policymakers, regulators, and scientists. Some jurisdictions have banned the practice of mining proof-of-work cryptocurrencies, while others are considering similar actions. The United Nations scientists have made recommendations for government interventions to monitor and mitigate the environmental impacts, including investing in more efficient and environmentally friendly digital currencies.

Frequently asked questions