Does crypto hurt the environment? Most large manufacturers harm the environment in some way, as do the numerous related industries, and their harm is not always taken into account. For instance, in the gold mining industry, no one factors in the energy consumption of jewelry salons, and in the banking sector - the deforestation and the depletion of other resources used to produce tons of paper consumed by banks.
Rather “dirty” technologies are used in something as “holy” as solar panel and wind turbine production, starting with the extraction of ore and ending with the disposal and burial of equipment that has served its time. Thus, when we look closely at different industries, it turns out that all of them are not as good as they want to seem (if at all).
Bitcoin mining is no exception - considering all of the above, it is generally a pretty “dirty” industry, too, even if it uses solar or wind energy. But in order to judge any industry for crimes against the environment, you must compare it with other industries, immediately recognizing that none of them are perfect. Is crypto bad for the environment (meaning mining)? Of course, it is. But is the harm of mining as great as it sounds, compared to the impact of all others? In fact, the crypto environmental impact is relatively small.
What is cryptocurrency mining, and how does it work?
The emergence of cryptocurrencies is associated with the emergence of blockchain technology. Blockchain is a registry or a book of records compiled sequentially block by block. The so-called consensus mechanism is used to verify the authenticity of each record, thanks to which there is no need to create a single control center. This approach allows you to organize structures that require no intermediaries - lawyers, notaries, lawyers or even banks.
All operations take place within the blockchain and are confirmed using the internal consensus mechanism. This is an incredible advantage of blockchain over any other accounting method, the reason for its phenomenal attractiveness and huge development prospects.
Talking about the environmental impact of blockchain is wrong - it's just a technology. However, cryptocurrencies are a direct consequence of the blockchain's capabilities, since a self-filling transaction register is the most fertile environment for issuing and accounting for asset movement. It's cheap, because there are no intermediaries (you don't need to keep a central bank for printing money), and extremely accurate, because nothing can be recorded in the blockchain retroactively (once again, no need for a central bank). That's why cryptocurrencies have emerged, and why their march across the planet is causing so much controversy.
However, where does the harm to the environment come from? It's not about the blockchain environmental impact, but about the consensus mechanism. Any consensus mechanism is based on spending or blocking any significant resources - otherwise it is impossible to ensure authenticity and security. For example, in order to add another Bitcoin block with confirmed transactions to the blockchain, you need to do a huge amount of computational operations. The energy burned is a kind of payment for the right to claim the truth and leave a mark in history at the same time. If this mark turns out to be dishonest, the efforts will be wasted and someone else will add this block.
Cryptocurrency energy consumption
Let's say, there is a contest - whoever eats the most hamburgers in an hour in a locked room, can take a picture with the previous winner and get $200,000 for it! Given the reward size and the apparent simplicity of the task, a serious competition begins, and no one intends to cheat - overeating, and then being removed for cheating is a bad prospect. And how else can you take that coveted photo?
Exactly an hour goes by. The winner is selected. All the contestants agree that a certain man won fair and square, everyone saw that he didn’t hide hamburgers in his pockets and really did eat the most. Then the winner diligently finds out who the previous winner is and takes a photo with him. It goes up on the honor board, and yes, indeed, it’s the same person as in the previous photo! So, the task is completed. The winner receives the promised $200,000.
Meanwhile, news of the competition spreads far beyond the hall, and there is a huge influx of participants - the conditions are too tempting! Everyone capable of eating a hamburger breaks into the hall and fights for a chance to win. As the competition progresses, the photo gallery grows, and all the winners are connected to each other - the chain is never broken. However, there is an ongoing public debate about whether all of this harms the contestants’ health. Is the meat industry being harmed by the forced overproduction of hamburgers leading to the decreasing number of livestock, rising meat and feed prices, and most importantly, the waste of an incredible number of hamburgers? After all, only the winner gets a reward - all the others have been eating in vain!
As a result, someone gets jealous, someone else grows indignant, but hamburger manufacturers are happy. Analytical companies issue reports on how much was eaten and by whom, how many cutlets, buns, sauce, disposable tableware and garbage bags were manufactured... Is all of this good for the environment?.. Things are just running their course. There is a counter-question - maybe smoking, alcoholism, drugs, poor-quality water and food are more important problems? Is this contest so important in the light of other, far more significant problems of the human race?
Well, it's worth admitting that Bitcoin mining is also a competition, although as a consensus mechanism (choosing a winner), it uses electricity consumption rather than the consumption of hamburgers, and each new block (a picture on the wall) is added about once every 10 minutes, and the reward for it is 6.25 Bitcoins, which, according to the mid-April 2023 exchange rate, is approximately $187,000. All the other twists and turns are described above, but, surprisingly, in all cases the issue of environmental harm comes to the fore, as if you need to choose which is worse - environmental impacts of cryptocurrency, hamburgers or whatever else.
Why cryptocurrency mining requires energy
How does cryptocurrency affect the environment? So, eating hamburgers as a consensus mechanism leads not only to overspending on meat, but also to serious discussions. Let's call this mechanism Proof-of-Hamburger (PoH). Perhaps someone could defend a dissertation on this subject.
However, there are more advanced algorithms, the most famous being Proof-of-Work (PoW). This algorithm is used in mining cryptocurrencies like Bitcoin, Dogecoin, Litecoin, etc.
At the dawn of the industry, participation in mining meant solving computational problems using ordinary computers, but now that even large corporations are engaged in mining, the process requires specialized miners - computers designed exclusively for this purpose. Being connected to the power grid, miners inevitably consume electricity, but since the scale of the competition is constantly expanding, total energy consumption already corresponds to that of a medium-sized state, as if the hamburger-eating contest had spread all over the planet and an entire country is functioning as a livestock farm.
“It's all useless! Why eat these burgers? Why take pictures? Who needs this meaningless row of photos on the wall? Why produce all these cutlets and breed cows? There is no benefit from someone earning $200,000 by eating an entire cow!” That’s all true. But it's just a stupid contest with unclear funding and goals. And now let’s get back to Bitcoin.
Environmental impacts of cryptocurrency mining
What's the environmental impact of cryptocurrency? So, in fairness, we must note from the outset that not a single contestant (miner) or a single cow was affected during Bitcoin production (mining). For each block, the miner only receives 6.25 BTC, but it so happens that BTC is worth $30,000 today. Why?! It's all about the blockchain and the trust system.
Let's think about the value of dollars and gold? After all, frankly speaking, they are just pieces of paper and chunks of metal. You can't eat them if you are hungry, you can't fire a furnace with them if you are cold. However, you can use them to buy everything you need in everyday life, and while gold is not as easily convertible into goods, dollars are accepted always and everywhere simply because that’s what the current rules are in the dollar trust system. This trust system did not emerge from scratch and has existed for decades, but the fact is that you can get everything you want for a piece of paper or even for a line of electronic code on the Internet.
Thanks to blockchain technology, Bitcoin, as the first cryptocurrency to emerge, has created a new system of trust without a central bank, funds, vaults, or tens of thousands of service personnel - there is nothing, except program code that cannot be hacked and an automatic mechanism for accounting and issuing coins about once every 10 minutes, based on, as practice shows, the most reliable Proof-of-Work consensus mechanism in the world.
Bitcoin is an amazing phenomenon of our time that is making a huge impact, which has yet to be fully assessed, so it is not surprising that it’s the subject of intense public discussions, a complete ban on Bitcoin in some countries, while other states, on the contrary, elevate it to the rank of state philosophy.
As for energy consumption and environmental harm, while they are certainly present, there are many reports that clarify that the "Bitcoin problem" is greatly exaggerated compared to major planetary-scale problems. Nevertheless, when the credibility of the global financial system is at stake, there is no doubt that it will defend itself by all means available.
The future of crypto and the environment
The problem of environmental harm cannot be considered a problem of Bitcoin alone or of the crypto industry alone. As greener technologies emerge, all manufacturing industries are starting to use them to a certain degree, and mining is no exception. Therefore, the future of the environment depends not so much on Bitcoin and other resource-intensive industries, as on the development of the energy industry. The cleaner the energy industry and the cheaper energy it offers, the less harm human activity in general and Bitcoin mining in particular will cause to the environment. This is an issue of the quality of technologies, the major players’ desire to develop them, and the states’ willingness to support the process.
As for Bitcoin itself and other cryptocurrencies, they are based on a technology that possibly has the brightest future - namely, the blockchain technology. Bitcoin is only one of blockchain’s many manifestations, but it’s so convincing that its value is bound to grow.
Trust is the one of the most valuable things in the world, so a trust system of such high quality and reliability as the Bitcoin blockchain will continue to exist as a benchmark for the entire crypto and other industries. There is every reason to believe that in the future no one will be surprised that the global trust system requires energy to maintain itself, but does not require any other resources, including tens of thousands of service personnel, tons of paper for documentation, megawatts of electricity for offices, or even tens of thousands of hamburgers to be delivered to these offices at lunchtime.
Is Crypto Bad For The Environment? FAQ
Is cryptocurrency environmentally friendly?
Cryptocurrency mining is an energy-intensive activity, however, renewable green energy is used in mining along with many other industries. According to the Bitcoin Mining Council (Oct., 2022), the Bitcoin network consumes only 0.16% of global energy production and emits only 0.10% of global carbon dioxide emissions.
Is crypto better for the environment than cash?
Not only paper money leads to deforestation, paper overproduction, chemical pollution, etc.; it is the global banking sector that itself consumes as much as a whole state: millions of offices consuming electricity, megatons of garbage and industrial waste, in short, it’s a much more harmful industry than mining, but it is a trust system that we are used to, so, we have to pay for it. Bitcoin is a new trust system that contraposes itself to the old one, which for obvious reasons causes resistance. However, blockchain technology has such a high potential that it is difficult to even imagine how the financial system will change in the future.
Does crypto really damage the environment?
Like any industry related to production, and hence to the consumption of resources, Bitcoin mining consumes electricity and inevitably harms the environment, since not all energy is clean. For instance, coal-fired power plants are very harmful. Nevertheless, the development of green energy and the emergence of modern energy technologies entail positive changes, as many manufacturing industries are beginning to use cleaner energy and their impact on the environment is decreasing. Mining is moving with the general trend, so the harm it causes to the environment can only be considered in the context of global changes in the energy sector.
Which crypto is the greenest?
There are cryptocurrencies that do not require mining, e.g., the Ethereum blockchain's Ether cryptocurrency uses a PoS (Proof-of-Stake) consensus mechanism, when electricity is not consumed at all. However, all such cryptocurrencies are already potentially considered securities by the SEC regulator, which puts them on a par with shares or bonds of public companies. Thus, the regulator is trying to include PoS cryptocurrencies in the traditional financial system, thereby gaining full control over them. It is impossible to do the same with Bitcoin.
