[Feature] Crypto Goes Green: Eco-Friendly Future or Environmental Disaster?

More often than not, if something is not directly affecting us or our quality of life, or if it is something that will not happen in the near future, we tend to approach it with a more devil-may-care attitude. However, if every individual possesses that sort of nonchalance, there would not be anything left for us soon, much less the future generation.

Since the emergence of cryptocurrency, concerns over its carbon footprint have been on the rise, especially when it adds to the already escalating climate crisis. You cannot get away from hearing about Bitcoin’s energy consumption if you talk about crypto exploring the green route.

Is Crypto Mining Really That Energy-Intensive?

Because it is not visible nor do the numbers mean anything to the general public, one might feel that others are just making a mountain out of a molehill. An article on CNET best explains this, “For starters, graphic cards on mining rigs work 24 hours a day. That takes up a lot more power than browsing the internet. A rig with three GPUs can consume 1,000 watts of power or more when it is running, the equivalent of having a medium-sized window AC unit turned on.”

Generally in just a single location, there can be hundreds or even thousands of rigs which take up power and generate heat. Do the math ─ more rigs equates to more heat. To counter this problem and prevent the rigs from melting, many mining rigs will install multiple built-in computer fans. Unfortunately, that does not resolve rising temperatures entirely. Big mining rigs need way more cooling, which in turn requires more electricity. Power plants within the vicinity need to produce more electricity to compensate when the rigs consume more energy, increasing the likelihood that more fossil fuels will be used. To make matters worse, there is also the electronic waste issue ─ broken computers, wires, and other equipment that are no longer needed.

How Much Energy Is Used Then?

The Bitcoin Energy Consumption Chart based on BitcoinEnergyConsumption.com. Energy consumption for BTC mining was at its highest at the end of last year and the early 2022, consuming over 200 terrawatt-hours (TWh).

One BTC transaction takes 1,449 kilowatt-hours (kWh) to complete, which translates to about 50 days of power for the average U.S. household (based on estimation by Digiconomist’s Bitcoin Energy Consumption Index). If that number does not shock you, then this just might: just a sole BTC transaction would generate about $173 of energy bill. It is not just BTC that has this problem; other crypto that use the same proof-of-work (PoW) consensus mechanism face the same issue as well.

Is a Greener Crypto Industry Possible?

Nothing is 100% but improvements have been made and still are being made. Rising awareness of crypto’s energy consumption, crackdowns from major countries, and more, have left not much choice but to adapt for the crypto industry. Existing and new blockchain projects are searching for ways to minimise energy consumption. Ethereum is one of the latest examples of having successfully done so ─ transiting from PoW to a proof-of-stake (PoS) system with over 99% reduction in energy consumption. The Merge represented a colossal step ahead for the crypto sector in terms of environmental impact, which was also a tremendous aid in changing the public’s attitudes toward crypto as well as instilling confidence in the future of blockchain technology. But is it enough?

The graph above, from Ethereum.org, shows the estimated annual energy consumption in TWh per year for various industries. The consumption has dropped significantly after transiting from PoW to PoS

Even though the upgrade has led to an environmentally friendlier mode of production, it does not mean that there is a substantial decrease in the overall emissions of the crypto ecosystem. One of the major ongoing issues is that Bitcoin is struggling to go green, despite making slim improvement in its usage of sustainable energy ─ Bitcoin mining from various projects have shifted towards cleaner energy yet fossil fuels made up some 62% of BTC’s energy mix in January, compared to 65% in 2021 ─ based on the latest data and research by the Cambridge Bitcoin Electricity Consumption Index (CBECI).

Just like Bitcoin’s rival, Ethereum, other blockchains like Solana and Cardano use variations of PoS that consume lesser electricity. Although Bitcoin remains the world’s dominant crypto, its energy consumption is as big a problem as its popularity. To mitigate this carbon footprint, the Crypto Climate Accord is working toward a goal of having all blockchains powered by renewable energy by 2025. In addition, it is also possible to purchase carbon credits to offset the footprint of your BTC portfolio.

“Several other crypto-assets like XRP weren’t mined at all but were instead produced algorithmically. This eliminates the need for dedicated high-speed mining equipment,” says Simon Peters, eToro’s cryptocurrency market analyst. But transitioning BTC to a PoS system is a tough nut to crack because majority of the miners would need to come to a consensus of a new system.

The introduction of carbon credits (are permits that allow the owner to emit a certain amount of carbon dioxide or other greenhouse gases), as mentioned earlier, in the case of a crypto mining company, might mean it purchases carbon credits from another company to aid in offsetting the emissions it generates or switches to cleaner energy to gain a profit from selling its credits. In a nutshell, they create a monetary incentive for companies to decrease their carbon emissions. As per Scott Janoe, chairman of environmental, safety, and incident response at Baker Botts, “These are tried-and-true method under a variety of programs like the Clean Air Act to get to net-zero emissions for products. So, I would see a move toward stapling credit products to Bitcoin mining and transactions to offset those emissions.”

Final Words

To give credit where credit is due, much have been done to combat the negativity of crypto on the environment, especially since crypto came into existence a little over a decade. But more awareness needs to be done on the education front for the general public. Do you think it is possible to achieve a future of zero emissions for crypto or will it hasten the global climate crisis significantly?

Disclaimer: The content in this article is solely the author’s opinion and is by no means financial/investment advice; it is purely for educational/informational purpose only. Please do your own research (DYOR) and never invest what you cannot afford to lose.