At first mention, mining may bring images of industrial mines filled with large machinery, clanking conveyor belts and people in hard hats. But in today’s modern age of technology, a new form of mining has appeared: the “mining” of cryptocurrency. Cryptocurrency mining does not directly leave a tangible scar upon Earth’s surface; however, to put things into perspective, the hidden energy requirements of cryptocurrency mining for Bitcoin consumes more electricity than Finland. This would place Bitcoin among the top 30 energy users worldwide if it were a country. In many ways, the rapid growth in the use of cryptocurrency has led to immense environmental impacts that largely remained unaddressed.
Cryptocurrency is a form of virtual currency that can be thought of as arcade tokens or casino chips that can be exchanged for real currency, such as USD. Cryptocurrency utilizes a technology called blockchain, which manages and records transactions in a network of computers on a decentralized network. The blockchain can be thought of as a never-ending receipt of all verified transactions. Cryptocurrency is appealing to many because of its decentralized network, which eschews a central authority, such as the government, or central banks that can manipulate prices and the level of privacy and anonymity in transactions when used correctly. Cryptomining is the process by which new coins are entered into circulation. Mining is a lottery to create new blocks in the Bitcoin blockchain which track and verify all transactions performed on the decentralized network. In exchange for handling these transactions, cryptocurrency is rewarded in a form of a lottery system that runs every 10 minutes.
There are thousands of different cryptocurrencies that can be designed in specific ways for a variety of purposes. Bitcoin, for example, was intended to be used as a virtual currency to send money. On the other hand, Ethereum, another popular cryptocurrency, allows users to create “smart contracts” that function as a program on the Ethereum blockchain. Perhaps the best metaphor is that of a vending machine: With the right inputs, a certain output is guaranteed. The power of cryptocurrency seems incredible, right? In reality, these cryptocurrencies are often used as a means of speculation and as a tool for the rich to become richer.
The use of cryptocurrencies as a means of speculation has led to its skyrocketing popularity as a form of investment. Like any stock, Bitcoin’s rising value has been driven by the many people who believe in the hype. Large financial firms such as BlackRock, which holds $9.5 million trillion in assets, have gotten in on the excitement and added crypto to its balance sheet. Ironically, Tesla, a company with an environmentally-forward stance, was awarded $1.5 billion in environmental subsidies in 2020, which then turned into a $1.5 billion investment in Bitcoin.
The incredible economic opportunity that cryptocurrency speculation poses has led to an arms race in order to maximize cryptomining performance. What once was a hobby for many has now been co-opted by wealthy individuals and firms who are capable of investing in industrial-scale cryptomining. Warehouses are filled with purpose-built mining computers and cooling equipment. Seeking the lowest resource costs and infrastructure, some companies have even moved north toward Arctic countries for cooler temperatures that would increase computer efficiency and lower cooling costs. In any case, the popularity of cryptocurrency has led to a level of industrialization that necessitates environmental action and oversight.
In January 2020, 75% of Bitcoin miners were located in China, a country that mainly gets its electricity by burning coal, according to researchers at the University of Cambridge. Miners relocate to wherever the cheapest energy is available, even if that means using electricity generated in an unsustainable manner. Adding to the problem, the process of mining Bitcoin is designed to be inefficient. As more miners are added to the decentralized network, the complexity of adding new blocks in the Bitcoin blockchain is scaled with the increase in computational power such that each lottery runs for 10 minutes, despite increases in computational efficiency. Essentially, 160 quintillion calculations are performed every second, which serve no other purpose but to waste an incredible amount of energy as only one calculation eventually wins the lottery. Moreover, cryptomining generates a large amount of electronic waste as hardware becomes obsolete. The constant turnover of cryptomining equipment is estimated to contribute 26 kilotons of electronic waste every year, according to Digiconomist, a site that tracks cryptocurrency sustainability.
It seems that the only answer to the unsustainable mining of cryptocurrency would be redesigning the way Bitcoin works. Other minor cryptocurrencies have moved away from an inefficient lottery system in favor of a “proof-of-stake” solution, which requires far less resources. Perhaps utilizing electricity generated from renewable energy would also be a viable alternative; however, this solution seems to only be a band-aid as the energy consumption of cryptomining continues to rise. In any case, consideration and action must be taken when considering the future of cryptocurrency as it continues to rise in popularity, value and energy consumption.