The COP26 introduced at the Glasgow climate summit 2021 with all the final decisions made, involved promises to restrict the emissions of carbon dioxide, and a move towards more renewable and safer energy production. However, though the summit isn’t legally binding, much of the weak promises remain unfulfilled by many countries. Moreover, with the rise in cryptocurrency popularity, the summit failed to realise and evaluate its crucial effects on climate and the environment.
Energy consumption and greenhouse gas emissions
Bitcoin is thought to consume around 707 kWh per transaction, as computers churn and try different ways to come up with the correct number sequence. Computers generate energy and get heated, thus, they will need to be cooled. A University of Cambridge analysis estimated that bitcoin mining consumes 121.36 terawatt-hours a day. The consumption amount is more than Facebook, Apple, Google, and Microsoft combined.
The numbers keep getting worse as miners increase computing power to compete with other bitcoin miners. These people have to process more transactions or reduce the amount of electricity being consumed since rewards are cut in half. Consequently, miners are always on the lookout for cheaper electricity, faster upgrades, and more energy-intensive computers. A study by Cambridge University revealed that only 39% of the electricity comes from renewable sources. Recently China cracked down on Bitcoin mining because of its enormous energy consumption. Greenridge Generation is a natural gas plant in New York that began bitcoin mining, causing its greenhouse gas emissions to increase tenfold between 2019 and 2020.
Water issue and E-waste
Large power plants like Greenridge consume water in enormous quantities, around 139 million gallons of freshwater for this plant. It discharges around 30 to 50° F water hotter than the lake’s average temperature. Change in temperatures can endanger wildlife and ecology, while large intake pipes can suck and kill fish, larvae, and other wildlife.
Moving to renewable energy for bitcoin mining will not solve the e-waste issue. It has been estimated that bitcoin networks generate 11.5 kilotons of e-waste each year.
The new form of digital art that is rapidly gaining momentum and popularity, is stored on the blockchain and is secured with the same work processes. The average NFT generates 440 pounds of carbon and produces emissions ten times higher than an average ethereum transaction.
Some artists realise the environmental impacts of NFTs and are striving to raise awareness and look for more sustainable options.
How can Crypto be more sustainable?
Bitcoin has already invested millions of dollars in the hardware and infrastructure of bitcoin mining, yet some companies are striving to reduce the environmental impacts it causes. CEO of Tesla, Elon Musk met with top North American crypto mining companies, forming a Bitcoin Mining Council to promote energy transparency.
The Crypto Climate Accord is supported by 40 projects and aims to make blockchains run 100 percent renewable energy by 2025 while changing the cryptocurrency industry to achieve net-zero emissions by 2040. The initiative wants to decarbonise blockchains by using more energy-efficient validation methods and other carbon offsets supporting green projects.
Ethereum is aiming to reduce its energy by 99.95% by 2022 by transitioning to an alternative validation system called ‘Proof of Stake’. This doesn’t require computational power and works instead, like the lottery, with a high probability if there is more quantity.
Bitcoin operations can also move next to oil fields where they can tap waste methane gas that’s usually flared and can be piped to generators, which will in turn power bitcoin mining. R.A Farrokhnia, professor at the Columbia Business School and executive director of Columbia Fintech Initiative remarks that “Each of these ideas requires very high upfront capital expenditures. And we know that interest in mining is predicated on the price of bitcoin itself, so you could have all sorts of truly expensive solutions that would aim to be more energy-efficient, but as soon as the price of bitcoin were to drop below a certain threshold, all these projects would be [cancelled] because they’re just not financially feasible. Who in reality would make those investments given the volatility in price of bitcoin and the uncertainty about the future of it?”
Farrokhnia believes that cryptocurrencies cannot ignore environmental considerations if they want to gain wider adoption. He says that the new generation of cryptocurrency is going to “move away from proof of work for a number of reasons, one of which is the environmental impact because most of these are being created by young programmers. They’re certainly more environmentally conscious, and hopefully, they understand the impact of the work beyond whatever they’re building and will take into account the complexity of today’s world.”