Crypto mining is the process of creating new digital “coins” is the process of, but that is about as straightforward as it gets. One must solve a complex puzzle to find these funds, validate bitcoin transactions on a blockchain network, and add the lost monies to a distributed ledger.
What is Crypto Mining?
Bitcoin is the first decentralized digital currency that uses blockchain as its foundation to enable peer-to-peer transfers without using any middlemen like banks, governments, agents, or brokers.
No matter where they are in the globe, anyone using the network can send bitcoins to another user there; all they need to do is create an account on the web, add some bitcoins to it, and then send the bitcoins. How can you deposit Bitcoins into your account? Online shopping or mining are both options for getting them.
Bitcoin can be used as an investment tool or for making online purchases. It is mainly used to pay for products and services.
How does crypto mining affect the environment?
High environmental costs accompany Bitcoin’s rising popularity. According to the most recent examination of its sustainability, the electronic currency might produce thousands of tons of electronic garbage annually (Joule 2019, DOI: 10.1016/j.joule.2019.02.007), and it needs as much energy as a medium-sized nation.
It uses specialized computer chips to crack cryptographic puzzles, and users “mine” new Bitcoins, which they then register as possessions on a blockchain, a public ledger of cryptocurrency transactions. It becomes increasingly more difficult to mine new coins, necessitating more processing power and, consequently, more energy, as there are currently roughly 17.5 million Bitcoins in use.
The energy consumed for mining Bitcoin and other cryptocurrencies must be determined promptly. Still, it can be calculated using the network’s hashrate and the energy usage of mining rigs that are readily available for purchase.
For instance, according to the Cambridge Bitcoin Electricity Consumption Index, the most widely-mined crypto network, Bitcoin, consumed more energy at the point of production than either Belgium or Finland, using an estimated 218 Terawatt-hours (TWh) and 85 Terawatt-hours (TWh), respectively. These figures are based on the most recent country-level energy estimates from 2019.
Based on energy use through July 9, 2022, a crypto analytics website Digiconomist estimated the amount to be 130.3 Terawatt-hours. Approximately 1,455.8 kilowatt-hours of electricity are used in each transaction, which is equivalent to the amount used by a typical American household over 49.9 days.
According to estimates based on energy usage through July 9, 2022, Ethereum, the second-largest crypto network, will need 62.77 Terawatt-hours of electricity annually. The typical Ethereum transaction uses 163-kilowatt hours of electricity. But following Ethereum’s proof-of-work update in September 2022, the amount of electricity needed has decreased to 0.01 TWh annually, with each transaction requiring 0.03 kWh.
Assuming that prices and user acceptance continue to fluctuate, the amount of energy used for cryptocurrency mining will change over time. Crypto mining is a competitive activity; as the value of the block reward rises, so do the incentives to begin mining. Cryptocurrency networks need more energy when prices are higher.
Measures that can be taken
Mining crypto consumes a lot of energy, but that’s a benefit, not a flaw. When a transaction needs to be validated, it is done automatically through a process called “mining” rather than by the involvement of banks or other reputable third parties.
The way the transaction validation procedure is set up requires a lot of energy because the network relies on the processing power of thousands of mining equipment. Blockchains that use proof-of-work consensus for cryptos are kept secure by this reliance.
The carbon footprint of cryptos must be calculated more intricately. Even if fossil fuels are the primary source of energy in the majority of the nations where cryptocurrencies are mined, miners must look for the least expensive energy sources to stay viable.
According to Digiconomist, the annual carbon dioxide emissions from the Bitcoin network are equivalent to Turkmenistan’s emissions of 73 million tons. Based on data through September 2022, it is anticipated that Ethereum will create 35.4 million tons of carbon dioxide emissions, decreasing to 0.1 million tons after it switches to proof of work.
The countries most affected.
According to University of Cambridge experts, the majority of Bitcoin mining occurs in Kazakhstan, China, and the US. Around 76% of China’s energy usage, according to the Center for Strategic and International Studies, comes from coal and crude oil. 21% of the global hash rate is attributed to China. According to 2019 data from the EIA, almost 38% of mining occurs in the United States. The majority of the country’s electricity is produced by burning fossil fuels.
13% of the world’s Bitcoins are mined in Kazakhstan, which mainly employs fossil fuels.
As a result, almost 72% of the world’s Bitcoin mining is done by three nations that rely primarily on fossil fuels.
Electronic Waste
Due to the rapid obsolescence of mining equipment, crypto-mining produces a substantial amount of electronic trash. This is particularly valid for Application-Specific Integrated Circuit (ASIC) miners, specialized devices for mining the most widely used cryptos.
The Bitcoin network, according to Digiconomist, produces almost 38,000 tons of electronic garbage each year.
Is cryptocurrency friendly to the environment?
Some cryptos require a lot of energy, specialized equipment, and garbage to operate. However, it’s crucial to keep in mind the environmental costs of harvesting natural resources and using power and electricity to create and sustain fiat currency and our current banking system. In that regard, some are not environmentally friendly.
Bitcoin: Is it Possible to Go Green?
In other words, it seems doubtful that Bitcoin will minimize its energy footprint given how energy-intensive, competitive, and reward-based the validation process is. The network will still need a lot of electricity to validate transactions after the last bitcoin is awarded.
Bottomline
Some people refer to cryptocurrencies as virtual currencies with a genuine carbon footprint. Even if they might shape the way finance operates in the future, one thing is for sure: if they stick around, the world’s energy consumption will go up dramatically. The contrast between the advantages of cryptocurrencies and their environmental costs should be highlighted as the effects of the climate crisis intensify.
