One of the biggest breakthroughs that took place on our planet during the 2010s was of course the cryptocurrency market.
Ordinary people around the globe felt disappointed about the current financial system looking for an outlet in which they could count with.
Although we are just in the beginning in terms of cryptocurrency technology, the crypto market has invaded rapidly into our lives and it seems that is not going anywhere.
The Crypto market which is led by Bitcoin is growing extremely quickly in terms of popularity and as it usually happens in situations like this the criticism towards it is massive!
The biggest problem that cryptocurrency is accused of is that it consumes a lot of energy in order to keep going.
During that post we attempt an objective look inside the cryptocurrency environmental impact.
In a nutshell, we are going to see why the cryptocurrency technology which is called Proof-of-Work consumes so much energy, we will compare the consumption between Bitcoin, gold and the banking sector and finally we will discuss the option of green cryptocurrencies.
Cryptocurrency requires energy
It would be wise at this point to start with the following mind blowing facts:
- The Bitcoin network uses as much energy in one year as the whole country of Argentina.
- The Ethereum network uses as much power as the entire nation of Qatar.
In addition, researchers at Cambridge University showed Bitcoin’s massive electricity usage which convinced Elon Musk and Tesla to stop accepting Bitcoin as payment method.
Okay we got it, but where does all this consumption come from?
- Proof-of-Work – The vast majority of energy waste comes from Bitcoin’s (and many other cryptocurrencies of course) consensus algorithm. Proof-of-Work gives the advantage to cryptocurrencies not to rely on a trusted middleman such as a bank, or a single point of failure. As a result this system offers a significant advantage over centralized currencies. However mining procedure need several energy-intensive computations that account for almost 5 gigawatts, or nearly 1% of the world’s energy use!
- Mining hardware – In order to increase their competitiveness, miners always need to have state-of-the art hardware, meaning that they are in a constant procedure buying new equipment. This specialized hardware becomes obsolete every 1.5 years and can’t be reprogrammed to do anything else. It’s estimated that the Bitcoin network generates 11.5 kilotons of electronic waste each year.
Last but not least, it’s estimated that 65% of bitcoin miners are located in China, a country that generates most of its energy from coal and by the way, nobody expects China to go green anytime soon.
Bitcoin, Gold and Banking comparison in terms of environmental impact
All those facts mentioned above are indeed intimidating but the truth is that the comparison of cryptocurrency electricity use with particular countries is like comparing oranges to apples.
Subsequently, it would be fair and wise to compare Bitcoin and the total cryptocurrency environment with its competitor markets which is the gold but also the banking and financial sector.
Gold
Although it is very difficult to calculate the exact amounts, a study conducted by Depaul university reached the conclusion that the gold mining industry in 2020 totaled 265 TWh of energy used and 145 Mt of CO2 produced.
Where does the environmental impact of the gold industry come from?
Basically by mining deep gashes on earth that are so massive they can be seen from outer space.
You should also add the electricity costs from all jewelry shops and gold dealers from around the globe.
Banking
In the case of the banking sector, keep in mind all these bank buildings, ATMs, plastic and metal used to manufacture notes, coins and cards.
Additionally, let’s take for granted that all of the above need a massive amount of constant electricity usage to keep running.
So a very conservative estimation from nasdaq.com suggests that the banking sector amounts to 700 TWh of energy consumed, and about 400 Mt of CO2 produced.
Bitcoin
According to the Cambridge Bitcoin Electricity Consumption Index (CBECI), Bitcoin needs around 113 TWh annually.
We should also mention that Bitcoin emits 70 Mt of CO2 per year.
Take a look at the table below;
| TWh of energy consumed / Year | carbon dioxide (CO2) emissions / Year | |
| Gold | 265 TWh | 145 Mt |
| Banking | 700 TWh | 400 Mt |
| Bitcoin | 113 TWh | 70 Mt |
Consequently, it would be safe to say that;
- Gold emits twice CO2 than Bitcoin does
- Banking and financial sector’s emissions are almost 5 times more than Bitcoin’s
Green cryptocurrencies
Although Bitcoin is the most renowned cryptocurrency and Proof-of-Work the most popular consensus algorithm out there, there are a plethora of other cryptos that have spotted the environmental harassment of these methods and decide to adopt a more eco-friendly approach.
Some of the biggest green crypto coins are;
- Cardano
- Chia
- XRP
Those cryptocurrencies do not use Proof-of-Work and mining because of the massive amount of electricity that it needs.
Instead they use the Proof-of-Stake method as their consensus algorithm which means that they use hard disks and not GPUs.
Conclusion
To sum up, if we take a calm and objective view on the hot topic of the cryptocurrency environmental impact, we will realise that things are not that bad as many people argue.
On top of that, there are so many promising green cryptocurrencies outhere that are willing to replace Bitcoin and it’s mining technology, with a more planet friendly approach.
We could also say that if Bitcoin is really that bad for the planet, some other digital coins are going to replace it and make it obsolete and a beloved ancestor.
So crypto lovers don’t be afraid, cryptocurrencies are not going anywhere, but of course we can’t say the same about Bitcoin!
