Is Cryptocurrency-Mining Bad for The Environment?

Before any assessment of the effects cryptocurrency has on the environment, I have to establish context and ensure everyone’s on the same page. What exactly is cryptocurrency and crypto mining?

Well, crypto mining refers to the process of solving cryptographic equations through the processing power of computers. It involves validating data blocks and adding transaction records to a public record (ledge) to establish a blockchain. By aggregating processing power from miners, cryptocurrency establishes a reward for these efforts while working to maintain a decentralised ledger of transactions untrackable by any single entity. Entire networks of devices are involved in this process of crypto mining and these shared records are then kept as pieces of a blockchain as miners work towards rewards in the form of cryptocurrency.

Cryptocurrency-Mining and Its Impacts On the Environment

From obscure origins, cryptocurrencies have clearly come a long way. Traditional institutions which once disdained and rejected notions of decentralised finance have now made strides towards legitimising this revolutionary technology. These original doubts were not unfounded, as cryptocurrency was once upon a time a tool used for criminal transactions due to privacy and it being untraceable. As more legitimate organisations adopt policies on policing and observing cryptocurrencies, the industry has seen massive growth in a few particular stable coins such as Ethereum and Bitcoin. Both have displayed massive upticks in value in the past decade, as mainstream adoption hit an all-time high.

Despite all these boons, environmentalists and sceptics still decry the benefits of crypto mining citing that it actually does more harm than good. The concerns raised pertain to the energy consumption of crypto mining, which results in increased carbon emissions and contributes to climate change. Bitcoin and other proof-of-work cryptocurrencies require large amounts of energy to function, due to the complex computations needed for mining. By the latest estimates, the bitcoin network uses as much energy in one year as the country of Argentina (121 Terawatts-hours of electricity annually). Not to mention, Bitcoin miners also go through mining equipment at a blistering pace and generate up to 11.5 kilotons of e-waste every year.

Investing in Cryptocurrency – The Green Way

That’s not to say that all cryptocurrencies are inherently bad – that umbrella statement would be unfair to systems that have been developed for sustainability in mind. The largest proof-of-work blockchains undoubtedly put a strain on the environment, but there are clear ways to invest in cryptocurrency for the eco-friendly and conscious.

For example, blockchains such as EOS and Cardano run off proof-of-stake (PoS) systems that don’t require as much computing. PoS systems operate by requiring those who participate in the currency to buy tokens in order to join the network. This ostensibly limits the amount of mining power an individual has relative to their stake in the network. Ultimately, it incentivises personal responsibility and cuts greed out of the equation. By disallowing large networks to overclock systems and burn through computations, less energy is consumed in the grand scheme of things.

In the case of Cardano, it also provides for the system to scale up when needed to meet increased demands for the cryptocurrency, without compromising on speed or efficiency. Compared to Bitcoin networks, Cardano only uses an estimated 6 Gigawatt-hours of electricity annually. Along the same lines, EOSIO also adopts a similar PoS platform that uses pre-mined EOS tokens that are tradeable on standard cryptocurrency exchanges such as Coinbase, Binance, and Kraken. Cost-free, simple and extremely scalable, the allure of these networks are plain to see.

I firmly believe that cryptocurrency and environmental sustainability does not have to be mutually exclusive. There exist green vehicles of investment that savvy investors can look to utilise in expanding their portfolios. As with all investments, it behoves the individual to do their due diligence and ensure that they’re buying into a platform that is not only profitable but viable in prolonging the longevity of our planet.