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The Environmental Impact of Cryptocurrencies: Myths and Realities
Cryptocurrency has gained traction over time, and it has continued to grow and become a household name. It was claimed that it has a negative environmental impact, and some have even claimed that it is instrumental in causing climate change. However, these assertions are not totally true. There are some myths and realities about the influence of cryptocurrency on the environment.
Cryptocurrencies are digital assets that use cryptographic technology to secure transactions, and they operate on a decentralised network called a blockchain. The blockchain is a public ledger that verifies and records transactions, eliminating the need for an intermediary or central authority.
The myths about the impact of cryptocurrency on the environment are carefully enumerated below:
1) Cryptocurrency is not Good for the Environment.
It is not true that cryptocurrency is entirely bad for the environment, but the process of mining some cryptocurrencies consumes sizeable amounts of energy, and not all cryptocurrencies consume such an amount of energy. For instance, bitcoin is known to consume a lot of electricity. However, cryptocurrencies like Ethereum do not consume much energy because they use the proof-of-stake consensus.
The carbon footprints of cryptocurrency mining activities have caused a lot of argument in the crypto space, and most of this argument is not totally true. It was claimed that the energy consumption of cryptocurrency is wasteful and unnecessary. It is true that cryptocurrency mining requires a significant amount of energy, but the energy is needed to maintain the security and credibility of the blockchain network.
Additionally, there are cryptocurrencies like Chia that use a totally different consensus called “proof of space and time.” This mechanism consumes less energy than the proof of work or the proof of stake algorithm.
2) Cryptocurrency Mining is Instrumental in Carbon Emissions.
Arguably, cryptocurrency mining is contributory to carbon emissions, but that does not mean that it’s the only factor responsible for the emissions. There are other activities that people engage in, and they contribute immensely to the carbon emission; such activities include the disposal and production of electronic components, etc.
Ultimately, a larger part of the energy that is used in cryptocurrency mining comes from non-renewable sources. Now, this is gradually changing because there is a shift towards the utilisation of renewable energy sources.
(3) Cryptocurrencies Are Not Sustainable.
Cryptocurrencies are definitely sustainable, and in reality, there are so many cryptocurrency projects that are actively working towards sustainability, and they are transitioning from the proof-of-work consensus algorithm to the proof-of-stake algorithm. meaning that they are moving towards utilising more energy-sufficient systems. Ultimately, there are schemes established towards achieving energy-efficient systems. For example, the Crypto Climate Accord is an initiative that is aimed at making the crypto industry carbon neutral by 2040.
The realities of the impact of cryptocurrency on the environment are carefully enumerated below.
1) The Environmental Impact of Cryptocurrencies is not Constant.
Different cryptocurrencies consume different amounts of electricity, and as a result, they have different impacts on the environment. For instance, bitcoin has an estimated electricity consumption of 100 TWh annually, which is way more than the energy consumption of countries like Argentina and Norway. Other forms of cryptocurrency, like Ethereum, are calculated to consume less energy. It was estimated to consume 26 TWh annually. As cryptocurrency develops, we will continue to witness the creation of more energy-efficient cryptocurrencies. The proof-of-stake (PoS) mechanism requires significantly less power than the proof-of-work (PoW) mechanism that is primarily used by bitcoin and some other cryptocurrencies.
2) It’s True that Cryptocurrency Mining is Contributing to Carbon Emissions.
Ultimately, it is crucial to note that cryptocurrency mining is just one of the many industries that contribute largely to carbon emissions. Research revealed that the production process of the traditional currencies has great impacts on the environment as well. More so, other industries like transportation, manufacturing, and agriculture also greatly contribute to carbon emissions. Because the crypto space is shifting towards more sustainable and energy-efficient cryptocurrencies, not all the cryptocurrency mining farms are utilising fossil fuels.
3) Cryptocurrency is Sustainable.
Overtime, the cryptocurrency industry is constantly evolving, and its sustainability is constantly improving as well. The major players in the crypto industries are really working towards creating sustainable cryptocurrencies, and there is a positive result. While there is still a lot to be done, there are many initiatives that would help make cryptocurrencies more sustainable, and many of these initiatives are already underway. The initiative is called carbon offsetting; they invest in renewable energy projects to offset the carbon emissions.
Overall, the effect of cryptocurrency on the environment is complicated. There are lots of efforts underway to make cryptocurrencies sustainable, and a lot of schemes and initiatives are working actively towards achieving this aim. However, as crypto is evolving, we will be seeing a shift towards more energy-efficient and sustainable cryptocurrencies.