How could a purely digital currency and ledger system have any kind of measurable impact on the environment?
To understand the environmental crisis we could be headed for requires a basic knowledge of how cryptocurrency and the blockchain works. Wired magazine has a thorough Bitcoin 101 if you need a refresher. Basically the crux of what we're discussing here is how Bitcoin mining takes a LOT of computing power and computing power requires energy. As more and more people want to get in on cryptocurrency, more transactions are being processed which means an influx of computers signing on to be part of the blockchain, and math problems that get harder and harder, and require even more energy consumption. So for each incremental token mined, more and more energy is guzzled.
Pros and cons of cryptocurrency.
Pros: It's a decentralized currency that takes power away from governments and banks, it democratizes cross-border payments, it prevents against hyper-inflation and economic crises that affects a particular region of the world, and it gives those without access to banks or banking accounts a way to send money to loved ones.
Cons: Cryptocurrency is unregulated, lacking any laws or protection we currently have regarding fraud or theft, it enables payments to be used for nefarious purposes more easily, it opens up potential for hacking. And, perhaps the most dire con of them all is something we'r not talking about nearly enough: The potential devastating impact of cryptocurrency and blockchain technology on our environment
Let's break it down: If you looked at every single Visa card transaction for a year, processing those billions of transactions would be equivalent to the energy use of about 50,000 households. Let's look at Bitcoin usage. Bitcoin has a tiny fraction of the annual transactions Visa has, but the energy usage is off the charts. Each Bitcoin transaction consumes 4,000 times the energy of a single credit card transaction. Bitcoin transactions last year were equivalent to the energy usage of millions of households. And in just December 2017 alone, the total electricity usage in Bitcoin mining, increased by 30%. If we looked at Bitcoin as a country, it would be somewhere around Bulgaria's energy use(a statistic which may have changed even since writing this article). Considering that the entire global market cap of all of Bitcoin is only one third the size of the market cap of Apple (one company!) that's pretty scary when you think of the insane growth explosion we could be headed for with cryptocurrencies this year.
Now let's add this on to that the fact that a huge percentage of Bitcoin is mined in parts of the world that are predominantly powered by coal, or nations that don't have the same regulations around environmental protections and clean energy. A huge percentage of current mining is done in China and in rural parts of countries that don't even have access to clean energy to begin with. This article documents going inside a Bitcoin mining operation in Mongolia and found the energy demands of a single mine were equivalent to the carbon footprint of a Boeing 747 repeatedly flying around the world.
And this is only Bitcoin but the entire token market and cryptocurrency space is growing like crazy. There are now more than a thousand different types of cryptocurrency - even 'Energy Coins' are on the rise to help sidestep the Bitcoin energy factor. Millions of new opportunities are being created in terms of mining, blockchain - you name it. At the start of 2017, there were 11 hedge funds focused on cryptocurrency. One year later, there are more than 100 hedge funds and venture capital funds dedicated to cryptocurrency. Which means that in 2018, we are going to see hundreds of millions, if not billions, of dollars from these funds poured into this space, resulting in an explosion of new cryptocurrencies and startups dedicated to blockchain technology. (Ironically, many of these same investors are the ones driving battery-powered Teslas and drinking out of reusable water bottles!). Every single major financial institution, government, and tech company is investigating cryptocurrency and how to participate. Even Amazon is rumored to be thinking about cryptocurrency for their marketplace.
This trend isn't ending anytime soon. The chum has been dumped into the water. The sharks are rushing in. And our energy use is going to get a whole lot worse before it gets better.
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