Will cryptocurrencies wreck the global warming targets and trigger an environmental disaster? This issue has sparked heated disputes between proponents of cryptocurrency and others who want them banned.
When the initial generation of cryptocurrencies, such as Bitcoin and Ethereum 1.0, are mined, massive quantities of electricity are consumed. Mining is the process of creating new Bitcoins and maintaining and validating the ledger of transactions.
It is based on the "proof of work" idea and requires sophisticated and powerful computers to solve cryptographic puzzles.
Because of the way the first crypto currency, Bitcoin, and the ones that followed it, were developed, mining has become increasingly complex and expensive over time.
But how much electricity does bitcoin mining use? Estimates differ. Bitcoin mining presently consumes roughly 110 Terawatt Hours per year, according to the Cambridge Center for Alternative Finance (CCAF).
Others have estimated it to be closer to 155 TWh. To put it in context, it accounts for about 0.55 percent of worldwide electricity production, or about the same amount that Malaysia consumes each year.
And that's only for mining Bitcoin. When you factor in the others, you're looking at an even bigger energy footprint.
Critics argue that the CO2 and heat produced by crypto currency mining outweigh any benefits derived from the emission reductions achieved by the adoption of electric vehicles (EVs) around the world.
Bitcoin mining, like that of other cryptocurrencies, was particularly harmful to the environment until a few years ago, because miners predominantly used power from coal-fired power stations.
Many of the crypto currency mining centres were in China, and while some miners relied on cleaner hydro electricity, others relied on thermal power facilities as well. China accounted for more than 60% of Bitcoin mining at one stage.
However, China has tightened down on miners in the last year, and the majority of miners have begun to leave. In addition, rather of using thermal power, miners are increasingly relying on green and renewable energy.
The majority of miners labour in places where solar, wind, hydro, and even flared natural gas from oil wells are used to create energy. While they do not completely eliminate emissions, the crypto currency champions have made a determined effort to use energy that is both affordable and has a lesser carbon footprint.
Meanwhile, newer crypto currencies are assuring that they either consume less power for mining or employ an alternative type of validation known as "proof of stake," which does not necessitate the usage of the kind of power that proof of work crypto currencies do.
Even Ethereum, the second-oldest and most popular crypto currency, is releasing a new version 2.0 that will significantly reduce its carbon footprint.
Cryptocurrency miners are concerned that, in order to fulfil agreed-upon emission targets, countries may progressively control or prohibit mining. As a result, the quest for solutions is moving at a breakneck pace.
Several suggestions have been made, ranging from the creation of a new cryptocurrency that will be given to anyone who can prove that each tonne of CO2 or other greenhouse gases has been removed, to the development of new eco-friendly crypto currencies, to the creation of a blockchain-based platform to track carbon emissions and crypto currency usage reduction.
The Crypto Climate Accord, for example, envisions a deal in which all crypto currency activities are transitioned to clean fuels by 2040, resulting in net zero carbon emissions. The difficulty is that, while it has supporters, many of the more established and well-known cryptocurrencies have yet to sign up.
The difficulty is that employing green energy for cryptocurrency mining isn't a complete solution. Even when using clean energy or renewable energy sources such as solar, the sheer amount of power required by computers generates a lot of heat.
Crypto mining contributes to the growing pile of electronic garbage to be disposed of. Cryptocurrency mining is also becoming more complicated and requiring more computational power every year, posing its own set of environmental risks.
Crypto advocates claim that a solution that is acceptable to everyone will be developed someday. Crypto miners will play a role in grid balancing and flexible demand-response services, in addition to transitioning to green energy.
We'll find out whether that works out as well as they hope over the next few years. Meanwhile, environmental scientists intend to monitor the crypto mining business closely.
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