It is important that when we speak about cryptocurrencies, such as Bitcoin and the trading of non-fungible tokens (NFTs), that their environmental impact is also discussed.
Cryptocurrency, in any form, exists entirely electronically. This means that to participate in cryptocurrency, a certain amount of electricity is needed. According to Forbes, the energy required is by no means a small amount and the Bitcoin industry alone can consume as much energy as whole nations, such as Malaysia. However, it is important to note that the Bitcoin industry is not the only cryptocurrency industry that contributes negatively to the environment. NFTs also have a large impact.
Bitcoin and the environment
According to Forbes, the average Bitcoin transaction requires approximately 1700kWh of electricity to be successful. This is around two times the amount of electricity that the average home in the United States of America uses in one month. Adding to this problem is the fact that some Bitcoin companies have entered into partnerships with struggling fossil fuel power plants. This partnership allows for the power plants to stay in business, ultimately increasing overall carbon emissions.
A University of Cambridge analysis estimated that Bitcoin mining uses more electricity than Google, Apple, Facebook, and Microsoft combined. This statistic is only getting worse as, to compete with other miners, a Bitcoin miner must continuously increase their computing power which further increases the amount of electricity consumed within the Bitcoin industry.
Columbia Climate School further mentions that China, which previously allowed for a large amount of Bitcoin mining to take place, has recently cracked down on this mining. Amongst other things, China cites its reasoning for this as Bitcoin mining works against their goal to become carbon neutral by the year 2060.
Despite countries like China cracking down on the Bitcoin industry, Columbia Climate School mentions that the Bitcoin industry continues to produce an estimated 22 million metric tons of carbon dioxide emissions each year. This is approximately the same amount of emissions that would occur from the energy use in 2,6 billion homes over the course of one year.
Emissions aside, Columbia Climate School also mentions the environmental impact that the Bitcoin industry has due to its e-waste. It is estimated that the industry contributes to around 11,5 kilotons of e-waste every year. This further adds to the already existing e-waste problem.
NFT’s and the environment
In an article by Vice, it is mentioned that just the mining of an Ethereum-based NFT requires around 142kWh of energy – a large amount of electricity for only one NFT.
According to the Energy Information Administration, approximately 385 grams of carbon dioxide is released into the air per kWh of electrical energy used. This means that around 55 kilograms of carbon dioxide is released into the atmosphere for every NFT creation. This is around six times the amount of carbon dioxide output that occurs from burning an entire gallon of gasoline.
It is important to note that this is only the creation of one NFT. Due to the recent increase in NFT creation and sales, it is hard to comprehend the amount of energy being used by this industry alone.
How can cryptocurrency become more sustainable?
It is all good and well to complain about the drastic effects the cryptocurrency world has on the environment, but what can the industry do to mitigate this?
Forbes briefly mentions that Bitcoin mining operations could use zero-carbon resources, such as wind or solar power, to reduce emissions. This also has the potential to offer benefits directly to the grid wherever Bitcoin mining is happening. However, Columbia Climate School mentions that although this is a possibility, very few people are willing to invest the large amount of money it would require to use these energy sources. This is attributed to the volatility in the price of Bitcoin and the uncertainty of its future as a whole.
However, where energy needs to be, and can be, reduced is in the validations systems used in cryptocurrency transactions. According to Columbia Climate School, many people within the cryptocurrency industry are currently looking at alternative validations systems that will decrease the amount of energy required for transactions to take place. Vice mentions that one of these alternate systems is a proof-of-stake consensus model. This model is one of the most environmentally friendly blockchains. So, if you’re wanting to get involved in cryptocurrency and still look after the environment (as much as you can in this industry) then using blockchain models like this is the best solution.
As most countries in the world are still reliant on fossil fuels as their main source of energy, it becomes very clear that the carbon dioxide emissions associated with cryptocurrency have a detrimental impact on our environment. This will continue to be an issue within the cryptocurrency industry until a conscious shift in energy sources is made.
Image: Cletus Mulaudi