Cryptocurrency is something that attracts a lot of negativity and criticism, with issues such as the lack of regulations and an increase in Forex trading scams generating recent headlines. But another thing that people may not be aware of which also causes a lot of controversy is the impact that cryptocurrency has on the environment.
Crypto mining is very energy-intensive and, although it is just one method used to validate cryptocurrency transactions and mint new coins, it’s one which is primarily used by market leaders including Bitcoin and Ethereum. In this article, we look at the impacts that crypto mining is having on the environment and what this could mean for traders.
What Is Crypto Mining?
Cryptocurrency and Bitcoin mining involves the process of creating new coins and putting them into circulation. It is the way in which these networks confirm new transactions and it is one of the most vital elements of a blockchain’s ledger, maintenance and development.
Crypto mining uses sophisticated software and computing devices which are used to solve complex mathematical problems, as the computer which finds the solution to the problem then received the next block of the dedicated Bitcoin, with the process then beginning again. This can sometimes be done using just a couple of computers by regulated brokers, but it is becoming more common for there to be blocks and blocks of computers being used to crack these problems, thus using a lot more energy.
Although there is no way to wholly calculate the amount of energy which is used in the mining of Bitcoin and cryptocurrency, the figure can be estimated using the network’s hash rate as well as the consumption on commercially available mining rigs. It is estimated that Bitcoin, the most widely-mined cryptocurrency, has used around 85 Terawatt-hours (TWh) of electricity, which works out to around 0.4% of global electricity consumption – more than Belgium and Finland.
Another study found the figure to be closer to 130 Terawatt-hours, which averages out to around 1,455.8 kilowatt-hours – the same amount of power consumed by the average home in America.
The amount of energy generated and consumed by cryptocurrency mining is likely to vary over the next few years, based on the assumption that crypto prices and user adoption continue. Cryptocurrency is a hugely competitive industry and, as the value of the the coin increases, incentives for mining increase also.
Why Does Crypto Mining Use Energy?
Energy intensity used in crypto mining is seen as a feature as opposed to a bug. It is an automated process that validates Bitcoin transactions, without the intervention of third parties, such as banks. The way the crypto transaction validation process is designed is one which uses large amounts of energy and data. The network is dependent on the computer power of thousands of machines used for mining and this dependency is what maintains the security of the crypto blockchains.
The Environmental Impact
It is complicated to calculate the exact carbon impact that cryptocurrency is causing, however, it is known that ther impacts being felt. Although fossil fuels are now the main energy source in most countries where cryptocurrency is mined, crypto minders need to seek out the more inexpensive energy sources in order to stay in profit. It is estimated that Bitcoin network is responsible for roughly 73 millions tons of carbon dioxide emissions per year – this is equal to the amounts generated by Turkmenistan.