Back in 2009, a concerned tweet about Bitcoin's mining impact on the environment appeared on Twitter. Since then, mining has become more popular, energy-intense, and complicated. Research institutions roughly measure its average annual energy use according to the network's hash rate and consumption by commercially-available mining rigs. However, still, they have no accurate data.
Bitcoin's estimated annual electricity use is 85 Terawatt-hours (TWh), and energy use is 218 TWh, more than Finland or Belgium spend annually.
The University of New Mexico claims in its research for 2022 that the climate damage of producing Bitcoin has averaged 35% of its market value over the past five years, comparable to the beef industry with its climate damage of 33% of its market value.
While the beef industry has damaged the climate for decades, cryptocurrency production is a young industry that addresses the environmental crises and seeking for green solutions being mindful and forced by investors.
So, what is the real impact of cryptocurrencies on the environment?
Mining requires sources to produce enough energy and follow the current network hash rate. The competition is growing and making mining more expensive, so miners will likely use cheap sources to reduce costs and increase profits.
The cheapest sources now are wind and solar energy. Because of their interruptible nature depending on the daytime and season, they can't produce enough power when demand is high, and a grid is overloaded with power when society doesn't need it. The interruptibility comes amid grid congestion and specific localization, as solar and wind stations are usually built in village areas with low demand.
While people mostly use electricity in the late afternoon and early evening, mining can use it 24/7 and is locally agnostic, making it perfect for power storage. The ideal combination would be energy generation + mining + storage. Such projects could determine how to use produced energy depending on current demand and work without dissipation or "heat loss" that is common while storing energy.
Making mining green would bring green energy production to more profitability, attract investors, and help in further industry development. By "investors," we also mean the blockchain industry, as it is interested in producing cryptocurrencies at low source prices.
The mining industry has already turned to green solutions and currently operates with 37,6% of sustainable energy sources, of which 26.3% are renewables and 11.3% are nuclear.
There are successful examples of combining mining with hydropower used by mining companies. Hydropower has a low carbon footprint and is currently the most adopted energy source accounting for 18% of power generation. As well as wind and solar energy, hydropower is cheaper than fuel.
Addressing issues of high fees, low throughput, and negative environmental impact, in September 2022, Ethereum, the second-largest blockchain network, shifted to an upgraded 2.0 version using the Proof of Stake consensus mechanism. While its Proof of Work version, the network required electricity of 62.77 TWh per year and 163 kilowatt-hours (KWh) per transaction and produced annually 35.4 million tons of carbon dioxide emissions. Since upgrading, it has reduced power usage to 0.01 TWh per year and 0.03 kWh per transaction and carbon production to 0.01 million tons. So Ethereum energy consumption dropped by 99.95%.
These changes are significant for the blockchain industry and environment since Ethereum's total global crypto-asset electricity usage was estimated from 20% to 39% before the 2.0 version.
Ethereum remains the most usable blockchain for creating dApps and launching layer-2 blockchains. The network has radically changed its environmental impact in less than 10 years since its launch.
Discussions around cryptocurrencies and their environmental effect turn us to the traditional bank system as a current and still existing alternative and original financial institution.
Environmentalists tend to compare the energy use of one Visa transaction and a Bitcoin one and consider the cryptocurrency climate-damaging. However, according to government sources, the estimated energy use of the finance and insurance industry was 4,936 TWh in 2022 which is almost 20 times more than Bitcoin mining.
Furthermore, fiat money tends to inflation. While Bitcoin's price is growing, considering different market sentiments and high volatility, USD is only getting cheaper and lose in its purchasing power. That leads society to spend money on goods and services than save, forcing supply to grow, producing more and more goods and trash in the end. With cryptocurrencies, the situation is different as crypto users tend to invest and save assets caused by the growing purchasing power of leading cryptocurrencies.
The traditional bank system is built so that consumerism hits its peak since people want to exchange money for values, while cryptocurrencies are values themselves.
SpectroCoin believes the whole crypto industry will turn to green solutions in the near decades and help develop those solutions by engaging investors. Even if investors are not interested in eco-friendly solutions, they are definitely interested in getting the profits that the crypto industry promises. Only with such equal values can society gain eco-mindful behavior in the capitalistic world.