Cryptocurrencies have become popular due to their ability to make transaction networks more efficient and secure. They are considered a potential alternative to fiat money because of their blockchain ledger technology which has a number of advantages over the traditional ledger system used in banks and other financial institutions.
With the increase in the investment in cryptocurrencies like Bitcoin over the years, a lot of resources and energy are dedicated to the mining of blockchains. Big investments from multinational corporations, financial institutions like PayPal and JP Morgan, as well as through trading platforms have increased manifold over the past few years. To accommodate all the crypto transactions the energy input into blockchain management has also increased substantially.
In this article, we shall discuss the environmental impact of crypto mining, to weigh out its benefits against its negative impact to understand if crypto is a sustainable technology for the long run.
Mining is the process through which new blocks of transactional records are registered within an existing blockchain. Mining is the process through which the ledger of the cryptocurrency is maintained. It is also the process through which new coins are generated and added into supply.
Mining can be understood in these easy steps.
- A user with a crypto wallet and a private key makes a transfer to another wallet.
- This transactional data is then downloaded by the miners in order to audit it.
- The data is downloaded in an encrypted format, which is then verified through the generation of the closest hash.
- The hash is generated by the computation of complex mathematical equations.
- Once the correct hash is generated, it is complied with along with other hash in the form of a new block.
- This new block is registered within the existing blockchain through a general consensus program where all the nodes within the network approve of the block’s validity.
- New cryptocurrencies are generated as a reward for the registration of this new block of data in the blockchain.
A mining rig is a computer that is connected to the blockchain network. These computers generally have high-powered graphics processing units to solve complex equations at a very high speed.
These computers also require an uninterrupted internet connection to download blockchain data, process them, and upload them back to the network. It is required to run a full node for at least 6-10 hours a day in order to compute blockchain data.
Environmental impact of mining
Now there has been a lot of talk on Bitcoin’s energy expenditure since Elon Musk commented on the environmental impact of mining. The price of a single Bitcoin fell from around 63,000 USD to 25,000 USD. So what did Musk mean when he said Bitcoin mining negatively impacts the environment?
- Bitcoin energy consumption- Now as it has been discussed above, the Bitcoin blockchain is a public ledger system that, instead of being managed by a single authoritative body, is maintained simultaneously by all the computers within its network
The mining rigs are high powered and the totality of power consumption by all the rigs in a bitcoin network is greater than the power consumption of entire nation-states. The total energy expenditure of Bitcoin mining all over the world is 118.9 TWh/year, whereas the power consumption of a country like the Netherlands is 117.1 TWh/year.
- Bitcoin electricity consumption- Bitcoin mining consumes a great amount of electricity to run their mining machines. Statistics on electricity consumption show that the electricity consumption of Bitcoin mining is 133.68 TWh per year. Whereas electricity consumption for Sweden is 131.80 TWh per year, for Ukraine 128.81 TWh per year. These figures show us how much non-renewable power goes into Bitcoin mining.
Conclusion: Any modern technology relies heavily on power. To make any technology sustainable for the long run, they should try to lessen wastage, reduce carbon footprints and pollution, and depend on renewable and clean sources of power. Only then will it be possible to make the world a better place.