In May 2021, billionaire and Tesla CEO, Elon Musk tweeted his concern about bitcoin mining and that sent the cryptocurrency into a tailspin. Musk’s questionable significant influence notwithstanding, did raise a growing concern about the carbon footprint of cryptocurrency.
In an interview with CoinDesk, Duke University professor and economist, Campbell R. Harvey said, “Bitcoin in its current form is not good for the environment.”
Deutsche Bank hasn’t been quiet on their concern that “mining just one bitcoin consumes a larger carbon footprint than nearly 2 billion Visa transactions.” In a published report on crypto’s sustainability, the bank reported that in the last three years, bitcoin’s market cap has grown from $70 billion to more than $1 trillion and its global energy consumption increased fourfold.
The crypto industry is growing quickly and on the heels of that momentum are concerns about its impact on the environment.
Let’s back up a little. While some of us don’t even know what crypto is much less the environmental impact. How is it possible that “mining” something intangible consumes so much energy?
In 2009, all you needed to mine a bitcoin was a desktop that had some kick to it, now, to achieve that same feat, requires a room full of specialized computers each costing thousands of dollars. Crypto’s environmental impact comes from the energy used by multiple computers (server farms) to generate proof of work (PoW). The process has been built in since crypto’s infancy, and whilst it is great for efficiency and security, its heavy impact on the environment cannot be ignored.
The process of creating bitcoin consumes roughly 91 terawatt-hours of electricity. That’s more watts used annually by, Finland, a small nation of 5.5 million people. An often-overlooked factor is the hardware used to mine crypto and its long-term usability. In this age where technology becomes obsolete before you can say “NFT!”- hardware quickly becomes obsolete.
Crypto enthusiasts are now in a tough position. Crypto tokens are supposed to power decentralization and change the finance, gaming, entertainment, and shopping industries. But how can we do that whilst emissions are continuing to grow? We can’t afford to ignore climate change and embrace more sustainable methods.
The second most popular cryptocurrency is Ether, which also uses a lot of power, however, their developers are planning a transition to a more eco-friendly mining process, dubbed ‘proof of stake,’ (PoS) This method has more of a consensus-based mechanism than PoW. The PoS transition entails better energy efficiency, reduced hardware requirements, and stronger immunity to centralization.
Newer cryptocurrencies created in the last five years use less energy. Bitcoin’s mining process is already outdated, but they are still industry standard? Does this mean it is time for a new standard? Well, that’s what this Defi and centralized place was created for, equity and a level playing for us all.