Is Cryptocurrency Bad for the Environment?

Cryptocurrency has taken over the online world. And, like everything that garners heavy attention, cryptocurrency (referred to as “crypto” for short) is now facing backlash for its potential harm to the planet. Many are claiming that the energy consumption associated with crypto transactions is unsustainable, and the resulting carbon emissions are a crippling environmental setback.

Cryptocurrency is, by itself, a rather confusing concept to most people. Throw on top the idea that something intangible could be super environmentally damaging, and it all becomes a major headache. We’ve stripped it back to basics to help explain what cryptocurrency is and why it may not be an eco-friendly solution to traditional banking.

What is cryptocurrency?

Cryptocurrency is a digital currency that is managed by a decentralized authority. Where traditional currency is managed by a central authority, like the government or a bank, crypto is run on a public ledger that is known as a blockchain. The blockchain stores transaction data in a network of encryption. This keeps every transaction secure, but it also requires an immense amount of computer power.

Is crypto harmful?

Ultimately, it’s the blockchain that makes crypto so appealing and also what makes it so environmentally destructive. Cryptocurrency as a system isn’t bad. It democratizes money, allowing anyone to secure their money from central forces. It also means that transferring money internationally is easier. While, in theory, crypto is the answer to a lot of traditional banking problems, the system’s energy consumption is what’s worrisome.

Because cryptocurrencies, the most well-known being Bitcoin, are managed by a secure blockchain, every transaction requires a network of computers to verify, transmit, and store transaction data in the blockchain. Hundreds of thousands of computers are working as part of the blockchain, resulting in what Fortune.com estimates to be $100 worth of electricity every transaction ¹. The consumption of Bitcoin alone, which is just one of the many cryptocurrencies on the market, would require 300 million trees to be planted in order to offset its carbon ².

Data scientist Alex de Vries estimates that the carbon footprint of the world’s largest cryptocurrency, Bitcoin, is equivalent to the carbon footprint of the entire country of New Zealand. The steady growth of cryptocurrencies, from an economic standpoint, has been remarkable. In April of 2011, a single Bitcoin was worth $1. One bitcoin hit a high in April of last year when one token was worth $65,000. While this has been great for those invested in the cryptocurrency system, it’s believed that once the price of Bitcoin eventually is worth $500,000, the famed cryptocurrency would inject more carbon dioxide into the atmosphere than the entire country of Brazil ³.

Can crypto become sustainable?

It’s indisputable that cryptocurrency isn’t energy-efficient. Cryptocurrency has invested millions of dollars in its infrastructure, so it seems unlikely that it could become an eco-currency. However, it’s not all bad news!

There are specific cryptocurrencies that are working towards reducing their carbon footprint. Elon Musk, the CEO of Tesla, has recently met with the heads of crypto-based companies to discuss their energy use and ways to make it a more efficient economy ⁴. One cryptocurrency, Ethereum, promises to reduce its carbon footprint by 99% over 2022 by creating an alternative validation system that doesn’t require heavy computation. Some crypto investors have even proposed moving crypto companies near oil fields so that the energy from the blockchain can be acquired using the methane runoff. Perhaps the best example of cryptocurrencies being utilized sustainably is how the country of El Salvador has adopted crypto as an accepted currency nationwide and has utilized geothermal energy from volcanoes to power the blockchain ⁵.

Cryptocurrency was never intended to solve the environmental issues associated with banking, but moving forward, it will be necessary for crypto-based companies and currencies to develop sustainable practices for the sake of the environment, especially as the number of crypto investors continues to grow.

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