The environmental concerns associated with cryptocurrency mining have not always been top-of-mind in regard to this industry. However, with increasing environmental concerns, it has become an increasingly debated topic in recent years.
Why does cryptocurrency consume energy?
At face value, cryptocurrency appears as a form of digital asset management creating the assumption that it would consume just as much energy as any other digital management process. Nonetheless, cryptocurrency creation and management requires more energy due to the additional process of mining. Mining is a process performed on powerful computers that involves solving complex mathematical equations to validate transactions on the Bitcoin platform and to create new bitcoins.
These computers require a large amount of electricity to operate. According to a study from the University of Cambridge Center for Alternative Finance, Bitcoin, the first and largest cryptocurrency by market capitalization, currently consumes more energy than the entire country of Argentina.
The cryptocurrency carbon footprint:
From an environmental lense, rising demands for cryptocurrencies equals an increase in the energy consumption required to mine them. The cryptocurrency mining process is creating a significant carbon footprint, thus contributing to climate change. It is estimated that cryptocurrency production and management may be responsible for as much as 22 megatons of CO2 emissions per year, which is similar to the emissions of entire nations like Sri Lanka or Jordan (Cambridge Bitcoin Energy Consumption Index).
But, it’s is not just how much energy cryptocurrency is consuming, but the type of energy it consumes too.
The primary source for electricity consumed by crypto miners comes from fossil fuels. In China, a major crypto mining hub, 74% of miners rely on coal-fired power plants, (Cambridge Bitcoin Electricity Consumption Index). The air pollution, health hazards, and environmental degradation in near-by areas has been correlated to the crypto mining hub.
Cryptocurrency vs. the Environment: What to do?
The use of carbon-fuels and fossil fuels is not a new problem, however it is a persisting issue that has inspired many initiatives worldwide. With the cryptocurrency industry growing at a fast pace, an eco-friendly solution is necessary. Some have proposed the adoption of clean energy and implementing more energy efficient technologies. In fact, some projects have already begun to address this issue in the cryptocurrency field.
However, the problem is not the absence of clean technology, but the adoption.
As of January 2023, cryptocurrency miners are under no obligation to adopt green technologies. Additionally, due to the financial strain the implementation of these technologies might incur, miners often require an investor or a passion for climate change to implement these eco-friendly practices.
Funding for Green Practices in the Cryptocurrency Industry
Despite the economic strain, it’s critical to act to reduce cryptocurrency mining’s negative environmental effects and encourage the usage of renewable energy sources in the sector, especially as the awareness of its environmental impact increases. At this current time, there are plenty of financing solutions available that promote the adoption of green technology. Speak to one of our experts today to start your journey towards sustainability within the crypto space!
