The Climate Crisis Under the Microscope Part Two: How Bitcoin Contributes to Climate Change
Opinion Analysis by Roa Daher, Featured Writer
April 22nd, 2021
In any talk of the industries’ exacerbation of the climate crisis, there is a short list of perpetrators in the public’s consciousness: the fossil fuel industry, Big Plastic, and the fashion industry of late. While people do think of ‘going green’ in terms of reducing electricity consumption, that thought does not usually extend to certain appliances or services that consume electricity like Wi-Fi for instance. Playing YouTube videos has a carbon footprint, sending emails has a carbon footprint, and pretty much everything we do online has a carbon footprint, no matter how menial it is.
The average email has a footprint of 3g of carbon dioxide, but that value can go up to 50g depending on the contents of the email. Because of the tiny footprint and the absolutely essential nature of sending emails or text messages, eliminating forms of communication that rely on the internet won’t solve the climate crisis. However, this just goes to show that nowadays every single aspect of our lives has a carbon footprint and thus an impact, no matter how small, on climate change. Primarily, this is because of contemporary society’s hyper dependence on electricity, and a rising source of electricity consumption is cryptocurrency (and perhaps more specifically Bitcoin).
The harm done to the environment by mining Bitcoin is due to the massive amounts of energy used in the mining process and the deliberate inefficiencies in the process itself that are essential to the democratic nature of Bitcoin. As explained here, mining Bitcoin involves solving very computationally complex mathematical problems which essentially require supercomputers and other technically advanced hardware. In other words, mining Bitcoin, especially now that only around 2.5 million Bitcoins are available to be mined, is an affair that needs advanced computers that use up a lot of energy while operating. This presents the seemingly innocuous and basic question of where this used energy is coming from.
Unfortunately, this is not a simple question because the answer depends on where the Bitcoin is being mined. With the bulk of mined Bitcoin coming from China, which uses coal for 57.7% of its energy output as of 2019, the concerns about the environmental detriment that Bitcoin causes is very much valid. Since around 40% of China’s Bitcoin mines are powered by coal, Bitcoin could be the reason Beijing’s 2060 carbon neutrality goal gets derailed which could have immense consequences for the rest of the world given China’s status as a top-tier carbon polluter.
Many proponents of Bitcoin emphasize that there is a very easy solution to make Bitcoin greener and that is to invest in renewable energy. To them I say: evidently easier said than done. The problem with the intention to switch to and invest in renewables is that it is much more expensive than simply relying on fossil fuels. It is no coincidence that close to 80% of global bitcoin blockchain operations are housed in China, where electricity and hardware are relatively cheap, instead of Iceland where almost 100% of energy is from renewable sources.
Luckily for the environment, continuous wishful thinking about switching to renewable-powered Bitcoin mining is not our only hope. Even though Bitcoin is currently dominating the cryptocurrency scene, there are other forms of cryptocurrency with some very green initiatives— namely Ethereum. To provide some perspective, even though Ethereum mining consumes a quarter to half of what Bitcoin mining does, it still used approximately as much electricity as Iceland did in 2018. According to Cambridge University, Bitcoin uses more electricity than Argentina and if it were a country, it would be among the top 30 polluters. However, Ethereum plans to revolutionize the cryptocurrency mining stage by reducing their emissions by 99%. Ethereum hopes to accomplish this incredibly ambitious goal, by switching from Proof of Work (PoW) to Proof of Service (PoS). Currently, most cryptocurrencies rely on a PoW system which democratizes cryptocurrency by allowing everyone to have a chance to find the nonce, which is the number you need to crack in order to earn Bitcoin.
This process is called mining. Since finding the nonce is essentially a random guessing game informed by luck and a hint of probability, it is extremely energy-intensive to have potentially hundreds or thousands of miners using massive amounts of electricity in an attempt to find the nonce. PoS works by assigning a nonce to one person, called a validator and is a verified miner who has the computational power needed to find the nonce. In the case that the initially chosen validator is unable to crack the code, backup validators replace them. Thus, PoS assigns one person to a task that was previously being done simultaneously by multiple miners, thus increasing the efficiency of mining cryptocurrency and greatly reducing the electricity consumption. A switch to PoS is much more fruitful and possible than a switch to renewable energy, but the clock is ticking, and the judge is still out on when cryptocurrencies will adopt PoS.
One more initiative interestingly taken on by private corporations in an attempt to ‘green’ cryptocurrency is the Crypto Climate Accord. Inspired by the Paris Climate Agreement, the Crypto Climate Accord has some insightful and progressive goals like achieving a zero net-carbon crypto industry by 2040 and allowing all the world’s blockchains to be entirely powered by renewables by the 2025 UNFCC conference. Even though this accord is more performative than action-based, and despite it not being legally-binding, it offers a glimmer of hope that the cryptocurrency scene does care about minimizing its environmental impact and will work towards that goal.
Cryptocurrency’s contribution to climate change is due to its carbon footprint: the carbon emissions that are a result of the energy-intensive nature of mining make the growth in popularity of cryptocurrencies like Bitcoin dangerous for the environment. Many crypto fans remain of the opinion that the democratizing benefits and applications of Bitcoin greatly outweigh the environmental harm. This wishful thinking is rooted primarily in ignorance and an unwillingness to address the facts and accept the scale of the Climate Crisis.
The reality is that no matter how revolutionary and beneficial Bitcoin is to society, it has an environmental impact that must be minimized. Entire foundations of contemporary living, like hospitals, Wi-Fi, or even emails, have immeasurably improved the standards of living globally but that does not mean that we turn a blind eye to how their energy use harms the environment and exacerbates climate change. Instead, the right thing to do is to invest in renewable energy and increasing energy efficiency to decrease carbon emissions of entire industries across the board, including the crypto industry.