When I was told there was environmental damage from cryptocurrency, I thought to myself, “how can cryptocurrency harm the planet, when it is digital?” Not knowing much about cryptocurrency but as a pretty environmentally conscious person, I had to investigate. And apparently in order to get cryptocurrency, it must be through mining.
What is cryptocurrency?
Bitcoin, the original cryptocurrency, was established in 2009 and since then there has been thousands more like it. Although it doesn’t seem difficult, considering the “mining” happens indoors and from a computer, the entire system is a massive energy drainer.
Because it is all done digitally, miners have to locate low cost electricity — leading to environmental hazards, impacting locals. The miners then produce currency through a very intense process that requires loads of computing resources. Usually done on a mining farm, it consumes, on average, 1% of the world’s energy or 37 million metric tons of carbon emissions annually. Just to give you an idea, that’s more than the total of Ireland and Austria’s energy combined. Put more simply: generating one Bitcoin is the equivalent of a 3 week span of energy in the average American household or 50,000 hours of YouTube video streaming.
Who owns cryptocurrency?
Short answer: not the government. It is actually being managed by grassroots communities. Essentially, individuals will gain cryptocurrencies via computer that then store information in a blockchain. The blockchain is essentially digital documentation of the entire method, making it so secure that even hackers can’t access it.
What is the mining process?
Essentially, there are a group of miners all competing to unlock the latest Bitcoin. Because competition is high, the difficulty of the algorithms increases to prevent inflation. Miners who are looking to solve the puzzles, use a great amount of energy to achieve that. If the energy cost of mining exceeds the profits, the incentive is low and vice versa.
To mine you need access to a lot of space to store your equipment and high speed servers. These big computers use a minimum of 1.5 kilowatts of energy, costing $3,224 to $9,000 USD per coin. Which brings us to the environmental impact and high footprint.
Experts predict crypto-mining can produce 3-15 million tons of global carbon emissions. There are very few conscious mining farms that are using reusable energy to produce crypto. A majority of them are on farms that use fossil and nuclear producers to make cryptocurrency. The profitability of cryptocurrency mining is mutually exclusive to the price of electricity. Translation: if one depreciates, the other will fail. Most mines want to operate on farms with the lowest cost of electricity to minimize their chances of failure in the event that electricity will depreciate. With this cheap energy, they are benefiting but the environment is suffering.
Impact on American cities
So what does all this mean for our cities? A few things it turns out. Crypto-mines offer less opportunities for communities as majority of the cities energy is going to the mine. Additionally, since a large portion of the process is automated, it leaves no job opportunity for the local people. In order to alleviate the impact, local and federal governments should establish laws and regulations.
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