What Will Happen Next?: Cryptocurrency and its Harm on the Environment

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Sydney Burnett ’23
March 1, 2022

Recently, the world has found itself in the wake of ever-changing circumstances. With contemporary efforts in reexamining various time-honored systems in anything from online stream services to climate change to navigating a worldwide pandemic, it’s only fitting that the financial world is, with these other institutions, changing dramatically.

How exactly is the financial world evolving? The answer lies within the rapid expansion of digital currencies. Merriam-Webster defines cryptocurrency as “Any form of currency that only exists digitally, that usually has no central issuing or regulating authority but instead uses a decentralized system to record transactions and manage the issuance of new units, and that relies on cryptography to prevent counterfeiting and fraudulent transactions.” With the cryptocurrency epidemic taking the world by storm, it is thought by many that someday it will replace and serve as fiat currency; however, what these individuals fail to recognize is how these advancements are simultaneously impacting the environment.

The cryptocurrency era is characterized by a period of exponential growth, and despite its many promising benefits, it is accompanied by several drawbacks: specifically the energy usage partnered with each transaction. Out of the many different competing cryptocurrencies, Bitcoin has continued to lead the pack. Bitcoin is marked by its extreme growth, as seen through its values multiplying throughout the past ten years. In October of 2010, one coin was worth around ten cents. Flash forward to 2022, where a single coin is valued at around $43,000. However, according to Fortune Magazine, bitcoin falls victim to its consumption of 1,173-kilowatt-hours of electricity per transaction. To understand its true weight, Fortune compares the expenditure to the volume of energy that powers an American home for six weeks.

In addition to its excessive energy use, Bitcoin and electronic waste also go hand-in-hand. In particular, a process called Bitcoin mining is responsible for a large portion of this waste. Bitcoin mining is a procedure defined by Bankrate: “In order to successfully add a block, Bitcoin miners compete to solve extremely complex math problems that require the use of expensive computers and enormous amounts of electricity.” In fact, Investopedia states that Bitcoin mining produces around 30 kilotons of electronic waste annually.

It can seem as if mining is the premier method to validate cryptocurrency transactions but urge yourself to think again. Many investors in cryptocurrencies continue to put money into the reliable and cheap process of mining without investigating the power-efficient systems being developed, namely Proof of Stake. Unlike Bitcoin and other leading cryptocurrencies who utilize a Proof of Work process mining with extremely complex math problems requiring the use of expensive computers, Proof of Stake does not and therefore flaunts a dramatically lower consumption of energy.

These problems do not just pertain to Bitcoin but to essentially every one of the 15,000 existing cryptocurrencies. However, various environmentalists and environmental justice groups caught on fairly quickly and have taken initiative in the form of coalitions, letters to politicians, and encouraging charitable groups to halt their acceptance of any and all crypto donations. But will these efforts be enough to change the face of the crypto world?

No matter who you are or what your stance on digital currencies is, it’s difficult to turn a blind eye to its significant energy consumption and environmental consequences. However, with the increasing knowledge surrounding the world of cryptocurrency, it will be interesting to discover whether or not companies will begin to take a step back from the intriguing monetary alternative and/or if the increasing sentiment surrounding it and action being taken by environmental groups will create a necessary push for various cryptocurrencies to reexamine their practices and implement more environmentally friendly systems.

Citations:

Tully, Shawn. “Every single Bitcoin transaction—even buying a latte—consumes

over $100 in electricity, says a new report.” Fortune Magazine, October 26,