Our environment has been damaged by fossil fuels, and industrial pollution that cause climate change. Cryptocurrency was initially seen as a paperless, greener alternative to traditional currencies.
These include the immense amount of energy taken up by cryptocurrency mining and mining rigs that end up in landfills, despite their lead and other heavy metal content.
So, is blockchain affecting lives for good, or can Bitcoin mining turn out to be a disaster that will sweep the world?
Let’s take a look at how it works, and the emerging environmental impact of cryptocurrency!
The Cryptocurrency Market – Where it All Starts
We can’t pass easily by the crypto market and avoid noticing how Bitcoin, Ethereum, and other altcoins are gaining traction. For example, Ethereum’s price has spiked four times from January 2021 to November the same year.
No one can argue that the cryptocurrency market is volatile, and most of the trends are bullish, attracting more and more investors. However, we cannot bypass the environmental issues that crypto hype causes.
And according to Investopedia, there are more than 8,000 active cryptocurrencies in January 2022. Their numbers will rise dramatically.
What is Bitcoin Mining?
Bitcoin is an online currency, but it differs from the dollar in one important way: it’s decentralized. This means there’s no central bank regulating Bitcoin transactions.
Instead, these records are verified by a network of computers that can process transactions and add new data blocks to the blockchain, which is essentially a public ledger of every Bitcoin transaction ever made.
Let’s watch a video by 99Bitcoins on how Bitcoin Mining works:
How many Bitcoins Will Be Mined?
The amount of Bitcoins to ever be circulated is capped at 21 million. More than 90% of the total number of coins have already been mined. This means there are less than 10% remaining.
How Many Bitcoins are Left to Be Mined?
According to the same source, about a bit over 2 million Bitcoins are remaining. Currently, 900 BTC are mined per day.
When Will the Last Bitcoin Be Mined?
Because Bitcoin uses advanced technology, we can predict that computers will mine the last Bitcoin in 2140. But why is that?
At the current rate (900 BTC/day), people should have access to all Bitcoins in less than 7 years. Well, it’s not exactly like that because of Bitcoin halving.
A halving event is an adjustment to Bitcoin’s block which cuts the supply of new digital coins entering into circulation. It is an algorithmically controlled process that affects the difficulty of mining new blocks on the blockchain, and it occurs approximately every four years.
Why does Bitcoin need halving?
Satoshi Nakamoto (Bitcoin’s creator) invented the halving to protect the cryptocurrency from inflation. Since governments can print fiat currencies like the US dollar in unlimited amounts, inflations are guaranteed.
What are the consequences?
Because Bitcoin block rewards are halved every four years, miners must work harder to earn the same amount of coins.
The process used to be easier when the block reward was smaller, and miners were incentivized to spend less time on the network. Essentially, miners will have to spend more effort to mine fewer coins.
How Can a Good Idea Quickly Become a Potential Environmental Disaster?
Cryptocurrencies were designed to be mined without any central authority, so they could never be hacked or tampered with.
This is why most cryptocurrencies are decentralized and designed to be mined more securely than fiat currencies. So far, so good.
Because of the decentralized nature of the most popular cryptocurrency blockchains – Bitcoin and Ethereum – every single transaction is recorded on top of all other transactions.
The transactions are traceable, transparent, and immutable, meaning that everyone has access at any time to any transaction (of course, users don’t have access to the private key of others).
How are blockchains potentially harmful to the planet?
The world is becoming more environmentally conscious. And governments are working towards reducing carbon emissions and using renewable energy sources.
While Bitcoin was initially hailed as the green-energy, paperless currency of the future, since all transactions occur in the cloud, things have changed.
Let’s see what the damages from a single Bitcoin Transaction are:
- Over 1081 kgCO2 or about 2.4 million VISA transactions
- 2277.13 kWh – or the average US household power consumption over 2.5 months
- Electronic waste 320 grams or the equivalent of almost 2 iPhones.
In December 2021 alone, there were more than 262,000 daily transactions on average, and the trend continued into January 2022, with more than 2 million transactions completed in the first ten days of the month!
ALTcoins are not ALTernatives
Unfortunately, the majority of the altcoins on the market use the same open-source protocol as Bitcoin. Although some technical differences exist, the basic architecture is the same, and all digital coins will eventually share the same problems.
Fierce Competition Knows No Borders
The Bitcoin network incentivizes people to mine by activating a process called “Proof of Work,” which requires an immense amount of computing power, and electricity, to complete.
Specialized computers, sometimes running multiple specialized systems simultaneously, are necessary to run the Bitcoin protocol. Thus, miners with access to large amounts of computing power will be most effective in mining Bitcoins.
But even that is not enough. People join mining pools to ensure they will be paid at the end of the day, as otherwise they risk being paid nothing.
As Thomas Heller (Global Business director at F2Pool) says:
”If the Bitcoin Network Hashrate is 100 EH/s (100,000,000 TH/s), a WhatsMiner M20S ASIC miner with 68 TH/s, has approximately a 1 in 1,470,588 chance of mining a Bitcoin block. With one block per 10 mins, they may have to wait 16 years to mine that one block.”
Unfortunately, the competition is severe, and that requires a constant investment in new equipment which means old equipment is getting thrown away.
Computer equipment contains lead and other heavy metals that are harmful when they’re not disposed of properly.
Fossil Fuel Usage and Carbon Emissions
Unregulated Bitcoin mining has a devastating impact on the environment, especially since one of the main causes of pollution and carbon emissions is using large amounts of electricity, which is generated by burning fossil fuels.
In China, Bitcoin mining has been banned due to its harmful impact on the environment and the country’s energy grid.
However, entrepreneurs have been known to circumvent regulations and continue mining for profit in neighboring Kazakhstan, where fossil fuels, particularly coal, produce large amounts of electricity (nearly 90%). The situation isn’t much better in the US, where about 60% of the energy comes from fossil fuels.
What are the Solutions?
It’s not all doom and gloom. While Proof of Work remains the most popular consensus algorithm in use today, other systems have been gaining popularity.
One such system, known as Proof of Stake, has been developed over recent years due to its reduced energy consumption. In Proof of Stake, coin owners create blocks rather than miners.
Because of this, the mining industry can ensure its energy consumption is significantly lower than its counterpart’s. The alternative model might reduce energy consumption by over 99.9%, a staggering number. Solana, Cardano, and Tezos are already becoming famous among cryptocurrency fans, and are becoming accepted as payment methods.
Methods such as these will significantly reduce the environmental impact of cryptocurrency, making it more sustainable and reducing the carbon emissions associated with the mining process.
Final Thoughts on the Environmental Impact of Cryptocurrency
The blockchain industry has proven that it is more than just a fad. Even though it is still in the early stages of development, financial institutions, governments, and many other entities have begun to explore its potential as an auditing tool.
However, the environmental impact of cryptocurrency, due to the energy intensive mining process, is substantial and cannot be ignored.
While existing cryptocurrencies operate on the same amount of energy as whole countries, the blockchain industry is working hard to find a more sustainable way of powering its operations.
Newer cryptocurrencies have already shown that they can do so through technological innovations, such as Proof of Stake.
Frequently Asked Questions
How does Bitcoin mining lead to carbon emissions?
Bitcoin mining uses a great deal of electricity, which is largely from non-renewable sources, like the burning of fossil fuels used in most countries. Many countries are banning or restricting Bitcoin mining due to high energy consumption, resulting in power cuts and long-term pollution. Check the full guide for more on the carbon emissions associated with the mining of cryptocurrency.
How can you mine Bitcoin without damaging the planet?
Unfortunately, there is no such thing as "harmless mining." There is a way to reduce the carbon footprint by mining cryptocurrencies in places with renewable energy sources (geothermal power plants, hydroelectric power stations, etc.). Read the full guide for more info.
Can someone mine cryptocurrency without using much electricity?
Some of the smartest geeks on the planet work with blockchains. They have found a way to decrease energy consumption by applying a different consensus mechanism called Proof of Stake. Read the full guide for more on Proof of Stake and how it works.
Columbia Climate School: Bitcoin’s Impacts on Climate and the Environment
Investopedia: Proof of Stake Definition
World Economic Forum: How to Make Cryptocurrency More Sustainable