1. How much energy does crypto use?
According to the Cambridge Center for Alternative Finance, Bitcoin’s estimated electricity use has soared from 14 terawatt hours per year in 2017 to 105 terawatt hours in 2021, surpassing Belgium’s overall domestic consumption. We expect demand to decline in 2022 when the value of crypto assets plummets, forcing some miners out of business. But the research platform Digiconomist says that the pollution caused by cryptocurrency power generation will still amount to about 64 million tons of carbon dioxide in 2022, more than the annual global emissions avoided by increased use of electric vehicles. I predict there will be more.
2. Why do cryptocurrencies require so much energy?
To order transactions on the blockchain, Bitcoin and many other networks use an algorithmic process called “hashing”. This produces numbers that miners race to guess in a brute force effort that may involve trillions of trials. The first to succeed will be given newly minted coins in a process known as “proof of work”. As more miners enter, speculation becomes more difficult, forcing investment in more powerful machines. Many miners now use thousands of computers in cavernous warehouses.
3. How are miners trying to reduce their carbon footprint?
Some are setting up shop in places like Norway or Texas where emissions-free solar, wind and hydro power are plentiful. Miners say their presence encourages the development of these clean power sources by helping balance the grid. Buy surplus power when renewables are plentiful and turn off computer banks when power demand threatens to exceed supply. Some miners have installed solar panels over their server halls or signed contracts to purchase low-carbon nuclear power. Some companies are sourcing electricity from surplus natural gas, or simply “burning” and disposing of it.
4. Are cryptocurrencies becoming greener?
It’s confusing. A February 2022 study in the research journal Joule found that Bitcoin’s environmental impact worsened after China’s mining ban, with the share of renewable energy used to power the network dropping to 40% in 2020. Based on the above, it is estimated that it will drop to about 25% by August 2021. After the ban, we will have a near-zero-carbon power source, but other power sources have emerged where coal still dominates the energy mix. This situation was further darkened by the “crypto winter” of 2022, leading to the demise of inefficient mining operations.
5. How is the government responding?
Some oppose cryptocurrency mining to protect environmental goals and grid stability. China’s ban was a response to power shortages that forced the government to cut industrial production. Iceland, Iran, Kosovo and Singapore have also restricted cryptocurrency mining. In response to the region’s energy crisis, the European Commission urged member states in October to end tax cuts for miners and prepare to close. Some governments want to reserve renewable energy for energy-intensive old manufacturing industries that are trying to decarbonise.
6. Is the carbon footprint of cryptocurrencies negative for users?
Some large companies and investment funds committed to combating climate change have been blocked from investing in cryptocurrencies. With Ethereum moving to a new system called ‘Proof of Stake’, by offering or staking a portion of a token for the chance to order and verify blocks of transactions, the power consumption is reduced by 99%. has been reduced. Ethereum backers hope to change the minds of developers who have avoided using Ethereum for finance, gaming and other applications due to its high carbon footprint.
7. What does this mean for Bitcoin?
Climate activist groups are calling on Bitcoin supporters to find their own low-energy technology, but many of the token’s diehards are opposed to intervening in the system. It is not clear whether this will lead to significant changes. The Ethereum switchover was initiated by the Ethereum Foundation, which was set up to ensure the long-term success of the token. Many organizations support Bitcoin, but there is no clear leader.
— With help from Eric Lam, Olga Kharif and Josh Saul.
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