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How Is Cryptocurrency Bad For The Environment?

by | Jan 3, 2022 | Trending

We all know that technology has modified the way people work, interact, shop, and even pay for items. For example, businesses and consumers no longer prefer cash, and contactless payments like Apple Pay are taking their place. As a result of this technical shift, a new payment method called Cryptocurrency has emerged. So, do you know what it is? And have you heard of bitcoin before? Or do you have any idea how these coins are wreaking havoc on our environment? So let us see how is cryptocurrency bad for the environment.

Continue reading this page if you want to find the answers to all of these questions!

What Is Cryptocurrency?

cryptocurrency

Cryptocurrency is an encrypted digital currency, making it relatively difficult to counterfeit. Various cryptocurrencies are based on blockchain technology, distributed on a global ledger enforced by a network of computers. Cryptocurrencies are different from traditional currencies in that they are not issued by a central authority, which theoretically protects them against government intervention.

Cryptocurrencies are decentralized digital payment systems denominated in artificial “tokens” represented by structured ledger entries. Bitcoin was the first Cryptocurrency to be developed on the blockchain, and it continues to be a popular and most expensive cryptocurrency in the world. There are thousands of cryptocurrencies available today, each with its own set of features and needs. Litecoin, Peercoin, Namecoin, Ethereum, Cardano, and EOS are just a few of the competing cryptocurrencies that have popped out due to Bitcoin’s popularity.

What Is Crypto Mining?

Have you ever thought about where Cryptocurrency comes from? Or, what does it take to mine Bitcoin and other cryptocurrencies?

Crypto mining is obtaining Cryptocurrency through high-powered computers to solve cryptographic algorithms. The solution process includes verifying data blocks and adding transaction records to a public ledger known as a blockchain. Complex encryption techniques are utilized for safeguarding this data.

Cryptocurrencies use a local distribution system and rely on cryptographic algorithms for payment verification. As a consequence, there is no single unified authority. Solving complex mathematical riddles that assist in authenticating virtual currency transactions and then updating them on the decentralized blockchain ledger is required to add new currencies to the ledger. The miners get compensated in Cryptocurrency as a result of their efforts. Mining is the process of creating new currencies.

You must have understood by now that there are numerous advantages to Cryptocurrency, but keep in mind that every coin has two sides. Yes, you figured it out. There are some disadvantages, as well.

Environmental Impact of Cryptocurrency

environment impact

 

You’ve probably heard of Bitcoin or Ethereum, and you’ve also heard stories about people making quick money with these and other cryptocurrencies. However, you may not have examined the ecological implications of digital currency. This is due to the high energy needed for mining, which mandates using a specialized computer program known as Application Specific Integrated Circuits to solve complex math equations.

According to actual data from the Cambridge Bitcoin Electricity Consumption Index, Bitcoin accounts for 0.40 percent of global annual electricity consumption and 0.34 percent of global total electricity generation, highlighting the importance of reducing the planet’s energy consumption and dependency on fossil fuels. While the figure may appear insignificant, it has a tremendous impact on the entire situation. Bitcoin’s annual electricity use is greater than the energy required to power all tea kettles in the United Kingdom for 29 years. In addition, Bitcoin is just one of the thousands of cryptocurrencies that are currently in use.

Other cryptocurrencies, such as Ethereum and Litecoin, are gaining popularity, increasing the global energy consumption rate. Bitcoin emits 36.95 megatons of carbon dioxide each year (equal to New Zealand), and it is estimated that Bitcoin alone might result in a 2-degree Celsius increase in global temperatures over the next 30 years.

How Can We Decrease The Impact Of Cryptocurrency On the Environment?

It’s quite evident that blockchain has the potential to transform our world in a variety of ways. But do you know what blockchain exactly is? Let’s understand blockchain before reading how it can help decrease the impact of Cryptocurrency in the environment. So, in a nutshell, blockchain is a distributed, immutable ledger for recording transactions, monitoring assets, and establishing trust. It provides digital wallets to reduce fraud and replaces inefficient systems with more efficient ones. As we have stated already, Cryptocurrencies like Bitcoin and Ethereum are the two most popular cryptos which demand a lot of energy to run.

The good news is that there are a variety of solutions that can help save our planet. However, they aren’t being accepted quickly enough right now. But companies that want to keep their heads above water — and keep up with the rest of the world — must educate themselves. The two areas listed below are ideal ways to start.

1. Green Energy Blockchain Mining

Mining using solar power and other green energy sources is a quick fix. There are numerous commercial facilities for crypto mining on server farms that use exclusively clean, renewable energy. For example, Genesis Mining allows you to mine Bitcoin and Ethereum on the cloud. The company, situated in Iceland, runs entirely on renewable energy and is now one of the world’s largest miners.

2. Energy-Efficient Blockchains Systems

While Bitcoin, Bitcoin Cash, and Ethereum all rely on inefficient cryptographic problem-solving known as “Proof of Work,” several newer blockchains use “Proof of Stake” (PoS) systems that rely on market incentives. On PoS systems, server owners are referred to as “validators,” not “miners.” They make a hefty deposit, or “stake,” of bitcoin in exchange for the privilege to add blocks to the blockchain.

In Proof of Work systems, miners strive to see who can fix issues the fastest in exchange for a reward, which consumes a lot of energy. However, in PoS systems, validators are picked by an algorithm that considers their “stake.” By removing the aspect of competition, energy is saved, and each computer in a PoS system can only focus on one task at a time.

Future Plan To Make Crypto More Sustainable

As awareness grows over the amount of energy consumed in cryptocurrency mining, new attempts to improve the sector’s environmental credentials emerge on a regular basis. Increased usage of renewable energy, more energy-efficient practices, and carbon offsets are among these. TRG Datacenters predict the emergence of new, more sustainable, environmentally friendly cryptocurrencies and significant modifications in existing currencies’ practices. According to the business, Nano, IOTA, and Chia are pioneers in environmentally friendly Cryptocurrencies that aim to mitigate transaction-related environmental impacts. The Crypto climate agreement, which aims to decarbonize the cryptocurrency sector and achieve net-zero emissions from cryptocurrency-related electricity use by 2030, has gathered the support of more than 45 organizations and individuals from the crypto finance, banking, energy, and technology sectors.

Conclusion

Cryptocurrencies are a booming sector. However, as we’ve seen, most of them have a significant carbon footprint, putting them in the spotlight of the European Union officials and thereby making them eager to combat climate change and reduce corporate carbon emissions. As the impact of the climate change issue continues to worsen, the trade-off between the benefits of cryptocurrencies and their environmental costs should be acknowledged.

 

Author

  • The author has done a master's in Environmental science and is currently working as chief Environmental Advisor with New Delhi State Government.

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