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Cryptocurrency is a digital currency that can be used to buy goods and services but uses an online ledger with strong cryptography to secure transactions. Cryptocurrencies operate within something called a ‘blockchain‘, which is essentially a gigantic database of information that cannot be altered or tampered with.
There are lots and lots of different cryptocurrencies around, including Dogecoin, Ripple, Ethereum, etc, but Bitcoin is the biggest. It was the first decentralized cryptocurrency introduced in 2009. Bitcoin has inspired hundreds of imitators, but it remains the largest cryptocurrency by market capitalization, a distinction it has held throughout its decade-plus history.
Public blockchains like Bitcoin are extremely transparent. The nature of blockchain technology means that all of the data is immutable, traceable, and permanent, meaning anyone can see the balance and transactions of any wallet address. Nobody, not the government, not even advanced hackers can challenge, alter or delete what you own on the blockchain.
When you buy any sort of cryptocurrency, you store it in a digital wallet that uses advanced encryption, rather than a standard bank account.
In the world of cryptocurrency, ‘mining’ is done by complex high-powered computers. Bitcoin miners run complex computer rigs to solve complicated mathematical puzzles, called proof-of-work (PoW), to confirm groups of transactions called blocks; upon success, these blocks are added to the blockchain record and the miners are rewarded with a small number of bitcoins. Other participants in the Bitcoin market can buy or sell tokens through cryptocurrency exchanges or peer-to-peer.
Bitcoin has been booming and its price exceeded $60,000 in October 2021, but it is said to be the least efficient due to its uncontrollable demand for computer hardware and energy.
Following are some of the reasons why Bitcoin is bad for the environment.
Consumes massive amount of energy
To quote Elon Musk, “Energy usage trend over past few months for cryptocurrency is insane.” Musk was referring to the amount of energy required for the creation of “mining” of Bitcoin, which is mined by high-powered computers, which compete to solve complex mathematical puzzles in an energy-intensive process. This process, in most cases, often relies on fossil fuels, particularly coal. To put things in perspective, Deutsche Bank analysts estimated that if Bitcoin was a country, it would use about the same amount of electricity a year as Ukraine.
In March 2021, Bitcoin’s electrical footprint was a little over 75% of the Netherlands’ entire energy production and about 9% of that of Russia. Similarly, various other researchers claim how disastrous the virtual coin is to the environment. According to reports, one Bitcoin transaction takes 1,544kWh of energy, which is equivalent to the power that can keep an average US household running for 53 days.
The figures of energy consumption by Bitcoin are very concerning as the numbers are going up rapidly.
Produces more E-waste
With the high energy consumption, the virtual currency’s mining produces a large amount of e-waste (electronic waste). E-waste is one of the major reasons for water pollution and soil pollution as the electronic equipment that is thrown away, toxic chemicals, and metals are deposited in the water and soil.
Due to the limited availability of resources used in the production of chips like silicone and quartz e-waste becomes problematic. Also, as the life span of the devices that Bitcoin miners use is only about 18 months, a lot of hardware is used quickly and eventually becomes e-waste. The researchers claim that the e-waste produced by Bitcoin per year (24 kilotons) is the same as e-waste produced by an entire country (Netherlands).
Bigger carbon footprint
Bitcoin mining consumes a humongous amount of energy which leads to a bigger carbon footprint with every passing year. As the value of Bitcoin increases so does its mining which means the puzzles become more complex and the companies invest in computing power.
As only a limited amount of Bitcoin can be produced daily the miners come online to compete in PoW mining making the puzzle harder and the production slower which makes it highly energy inefficient.
In research, the numbers were shocking where the single virtual coin carbon footprint was the same as 1,879,709 Visa transactions.
Lesser consumption of renewable energy
Bitcoin has been criticized for a long time for its negative environmental impacts, the defenders still say its switch to renewable sources would reduce its carbon emissions but the truth is Bitcoin still uses a colossal amount of energy.
As per reports, only 39% of the virtual coins PoW mining is done by the use of renewable resources. The miners are still moving to various parts of the world where fossil fuels are still used at a massive level. Many private companies are buying decommissioned coal power plants and making them a power plant cryptocurrency mining hybrid. Environmentalists worry that waste coal, the leftover materials from coal mining operations, can leach harmful chemicals into surrounding soil and water sources. And it still produces carbon dioxide when it’s burned.
A researcher from Columbia Business School quoted, “There’s a new generation of crypto coming on board, they are going to move away from proof of work (PoW) for several reasons, one of which is the environmental impact, because most of these are being created by young programmers. They’re certainly more environmentally conscious, and hopefully, they understand the impact of the work beyond whatever they’re building and will take into account the complexity of today’s world.”
Cryptocurrencies need to be more sustainable. They cannot ignore environmental considerations if they want to gain wider adoption, and that newer and greener cryptocurrencies will eventually eclipse Bitcoin.