Imagine you are a Dutch sailor in 1637. One morning, you present yourself at the house of a wealthy merchant for breakfast. Upon arrival, you notice a strange-looking onion and decide to pinch it. Surprisingly enough, it turns out not to be a regular onion but a valuable Semper Augustus tulip worth 3,000 florins. Compared to the wages of the time, it is equivalent to over today’s 3 million PLN. To be fair, the prices of tulips bulbs were truly exceptional.
But a month later, you wake up, and your fortune is gone. Nobody wishes to buy your tulips as just within a couple of days, tulip bulb prices had decreased tenfold, and people lost all their money. Sounds familiar? This is a parallel to what happened to cryptocurrency investors in May 2021. With one exception. Tulip bulbs were not accused of contributing to one of the greatest threats of the twenty-first century - the climate crisis.
Cryptocurrency is one of those topics that seem to be very mystical and highly exclusive. To understand why it might have a harmful impact on the environment, basic knowledge is vital. Cryptocurrency is a digital currency which means there is no physical coin or ledger to the crypto you own. Owners store the money in a digital wallet having special public or private keys for crypto transactions. Forget the password to the wallet - lose all of your money.
Decentralisation is the first principle of cryptocurrency. Normally when you pay in the store, there is a three pathway system - you, the bank, and the store. With crypto, the mediator is eliminated so that transaction is decentralised. The payment happens exclusively between you and the recipient.
While the whole concept of cryptocurrency is based on a digital ledger called Blockchain. Bitcoin and other cryptos, like Etherum or Dogecoin, are secured by cryptography. It helps to protect information through the use of code, so that payment is secured and can be ‘read’ only by its sender and receiver. Blockchain consists of a regularly updated computer network that solves math puzzles aiming to make a transaction go through. The benefits of this so-called ‘crypto mining’ are twofold. On the one hand, solved problems produce a new bitcoin, and on the other, they make a transaction trustworthy. To make this happen a huge amount of energy is used by computers solving puzzles on so-called ‘crypto mining farms.’ And that is where the environmental problems begin.
The greater impact of crypto
Cryptocurrency's bad environmental influence is not a new topic in the public debate. Back in 2009, a crypto pioneer Hal Finner tweeted about crypto’s potentially harmful effect on CO2 emissions; only two weeks after receiving the first bitcoin transaction. The problem was not significant until 2017, and then with growing interest in cryptocurrency, it exploded. Last year, Bitcoin’s energy consumption was greater than Argentina, as reported by Cambridge University. Why is that? The answer is straightforward. Most mining (around 65%) is concentrated in China, whose economy is heavily based on coal, while countries like Iceland or Norway, where almost 100% of all energy production is renewable, unfortunately, have minimal contribution to crypto mining.
Therefore, the first solution that comes to one’s mind is to power crypto mining with hydroelectric or geothermal energy. There is even a farm in Berwyn, Wales, where cow poo is powering the crypto mining of Ethereum. However, it is rather a fun fact or a hopeless dream. Overall, renewable mining is not a cheap solution yet, and hence, in the world based on 'gain the most, spend as little as possible’ - not realistically possible.
Interestingly, not all cryptos have the same influence on the environment. Bitcoin uses 10 times more kilowatt-hour per transaction than Etherum and thirty thousand times more than cryptocurrency Chia. There are also some initiatives like CleanOcean - a crypto action that removes floating ocean plastic and weekly donates transaction fees to ocean-related charities. Although cleaning up the ocean does not help much to stop climate change, it is definitely an intriguing project to follow up in the future.
The devil is in the details
After Cambridge University studies, Tim Berners-Lee (inventor of the World Wide Web) described cryptocurrency as ‘one of the most fundamentally pointless ways of using energy.’ Highly debatable point of view. Comparing energy usage to countries might be misleading. Bitcoin is meant to replace traditional methods of payment, and therefore, it should be put alongside others in the industry. Gold mining is a classic example of an eco-catastrophic event in human’s history. The process itself is rather unpleasant.
Not only is mining harmful, but rinsing the gold with dangerous mercury compounds is a real ecological problem, and no penalties have been applied. Compared to mining and running bitcoins network, gold mining is 50 times more expensive, as analysed by a tech investment Cota Capital, and uses around 131.9 TWh every year, which is higher than Bitcoin (110 ThW). Not speaking about overexploitation, murders of indigenous people in Amazonia, and ecocide events. In this light, it must be admitted cryptocurrency starts to sound more and more appealing.
It is much more complicated to calculate the outputs of the banking system, though analysis suggests it consumes around 140-200 TWh per year, including brick-and-mortar branches, ATMs or transportation. Besides, banks provide extensive amounts of money to fossil fuel companies - over 2.7 trillion pounds since the Paris Agreement came into force in 2015, according to Rainforest Action Network. Clearly, not environmentally friendly.
Last month, the United Nations published a statement about engaging cryptocurrencies in the sustainable development strategy. At the same time, three key players in pro-ecological actions (the Energy Web Foundation, Rocky Mountain Institute and the Alliance for Innovative Regulations) created the Crypto Climate accord aimed at ‘decarbonising the industry’ and achieving net-zero emission in the global crypto industry by 2030. That is a moderately ambitious challenge. Although still more progressive than the promises of most of the countries such as Poland, which plans to ban fossil fuels no earlier than by 2050. Let’s hope we all can wait that long.
Medical Sciences student at UCL. Since 2019, a co-organiser of Youth Strike for Climate in Gdańsk, working both locally and nationally. Interested in the influence of climate change on health. Also, a member of the national team of Students for Global Health in the UK and Polygeia Stockholm. In her free time, she is also a SaveEU Students campaign coordinator in the Federation of Polish Students in the UK. Currently surfing in Portugal all day long and trying to survive in the pandemic world.