How does crypto mining impact the environment? Does it cause global warming? Let’s find out
The number of mining operations increased dramatically in the United States after cryptocurrency mining was outlawed in China in 2020. Bitcoin used an estimated 36 billion kilowatt-hours (kWh) of electricity in the year before July 2022, which is more than all of Maine, New Hampshire, Vermont, and Rhode Island combined used in the same period. The past two years have shown that the sector prefers readily accessible energy and little regulation, reviving idle coal and gas plants, flooding the Texas electricity market when it was reformed, and connecting to power systems where regulators have little control.
Bitcoin mining is a very energy-intensive operation that jeopardizes the ability of governments all over the world to lessen our reliance on fossil fuels, which contribute to global warming. We won’t achieve the objectives outlined by the Paris Agreement and the Intergovernmental Panel on Climate Change to limit warming to 2°C if we don’t take action to stop this expanding sector right away. Its rapid expansion puts a burden on the energy infrastructure, drives up retail electricity prices, and boosts both global and local air pollution levels. The way proof-of-work cryptocurrency mining is set up encourages miners to ramp up their operations as rapidly as possible, frequently regardless of the energy supply. Indeed, large mining companies have demonstrated a willingness to invest in power sources that are ordinarily unprofitable, such as shut-down coal plants or gas plants with low capacity, as long as that electricity can be made available fast. The majority of Bitcoin mining enterprises have demonstrated little interest in investing in new clean energy, unlike other significant electricity users, and they have a short time horizon.
Proof-of-work The process of mining cryptocurrencies is designed to need a lot of energy. The approach essentially involves a race between millions of computing devices to solve a challenging but pointless task. To enhance their chances of receiving the reward, miners will try to utilize more-and faster-mining devices as long as the reward is high enough (i.e., the price of Bitcoin is high enough). The computational challenge becomes increasingly challenging as more mining equipment competes, and the amount of electricity needed to win rises. In these races, the electricity consumed by the miners grows exponentially over time.
The community involved in proof-of-work cryptocurrency mining is well aware of how undesirable its high energy usage-and habit of burning fossil fuels is at a time when the majority of the rest of the economy is working hard to swiftly decarbonize. The industry and its trade associations have released several sustainability claims in the past year, ranging from outright lies and greenwashing to nothing more than rosy assumptions that are contradicted by actual actions. Even though it only has a tiny fraction of the value, today’s cryptocurrency mining industry already consumes half the electricity of the whole worldwide banking system. Miners have repeatedly shown that proof-of-work cryptocurrency mining prioritizes the short-term need for large amounts of electricity over longer-term investments in renewable energy, from their initial rush to China, where coal is a major source of electricity, to the recent agreement between AboutBit and a soon-to-be-retired coal plant in Indiana. Moreover, proof-of-work mining is a built-in arms race toward higher energy consumption, until prices no longer support expansion, unlike other businesses where self-imposed, or regulation-based, community norms could lead to more sustainable practices.
Cryptocurrency mining should not interfere with efforts to improve the environment or public health or hurt ratepayers, according to state, municipal, and federal officials and regulators. Grids, utilities, communities, and customers are all at risk due to the tremendous energy consumption of cryptocurrency mining, which poses a danger to decades of progress made toward reaching climate goals. Some authorities have outright prohibited mining proof-of-work cryptocurrencies or are considering doing so. State, municipal, and federal authorities can take steps to safeguard energy infrastructure, communities, and ratepayers short of a total moratorium. Environmental regulators at all levels should take affirmative action to reduce the effects that cryptocurrency mining has on residents’ health and the environment.