Cryptocurrency is the financial sector’s “Knight in Shining Armour,” introducing millions of people to the benefits it provides, such as anonymity, adaptability, and security, to name a few. Bitcoin and Ethereum are its two most popular squires.
However, in order for cryptocurrency to be created and transactions to take place, people must mine them. Unfortunately, cryptocurrency mining consumes enormous amounts of electricity, and because Bitcoin is the most widely used cryptocurrency, it is also the most mined.
If you’re familiar with the crypto space, you’re probably aware that Bitcoin mining has been attracting increasing criticism for its unsavoury impact on the environment.
According to the Cambridge Bitcoin Electricity Consumption Index, the mining process of the genesis crypto asset consumes 0.6% of the world’s total energy consumption and consumes more electricity per year than Norway.
Furthermore, the global Bitcoin industry’s total CO2 emissions have risen to 60 million tonnes, equivalent to the exhaust from approximately nine million cars. This is an increase from the previous year’s total of 20 million tonnes. The rising rate of CO2 emissions, on the other hand, can be attributed to the recent surge in crypto activity.
Energy consumption and evolution of cryptocurrency mining
Twelve years ago, you could mine Bitcoin at home with a simple setup. The amount of energy required to mine one was minimal at best, and the value of Bitcoin was practically nil.
In 2022, you’d need a room full of highly specialised machines, each of which would cost thousands of dollars (up to $3,000), and the amount of energy required would be around $12,500.
Mining Bitcoin to spend or trade consumes nearly 91 terawatt-hours of electricity per year, more than Finland, a country of about 5.5 million people. Furthermore, mining bitcoin has consequences other than consumption and pollution.
Mining hardware is used and discarded because every mining group or company wants the fastest and most efficient equipment available. As a result, a new e-waste problem has arisen. According to economists, Bitcoin alone generates more e-waste than midsize countries, which is hardly a compliment.
Regulation of cryptocurrency mining
China is one country that has prohibited cryptocurrency mining due to the high energy consumption of electricity involved in the process. Today, crypto mining does not exist in China, which has sadly upended the global Bitcoin mining industry, as much Bitcoin mining was done from China.
On the other hand, Iran, which experienced a power outage last year, has banned cryptocurrency mining operations as part of an effort to relieve strain on the country’s power plants and avoid blackouts until March 6, 2022. As a result, 209 megawatts of power will be freed up for household consumption.
The European Union may follow suit, as top regulators recommend that the body prohibit a mining method known as “proof of work” in order to reduce energy consumption.
Clearly, these are not the final hard regulations on cryptocurrency mining, and they will not solve the electricity problem in crypto mining in the near future.
Is it possible to mine cryptocurrency with no energy consumption?
Miners are already looking into alternative energy sources. Some argue that solar power is the future of cryptocurrency mining, but this is debatable because some countries have colder climates than others. A Bitcoin mining rig with multiple GPUs requires approximately 6,000 watts of solar panels to run during the day while also charging batteries to mine at night.
Excess natural gas from oil and gas drilling sites is being harnessed by some miners. However, this remains difficult to quantify. Furthermore, this could result in more drilling. On a larger scale, this does not look good.
Regardless, there are a number of countries that have an advantage, such as Paraguay, which has a 100 percent hydroelectric energy supply. This means that cryptocurrency mining in Paraguay will have a lower carbon footprint than Bitcoin mining in fossil-fuel-dependent countries.
To summarise, cryptocurrency has already cemented its place in the global financial system and will only grow in the future. However, if cryptocurrency mining is not only left unchecked by regulators, but also by itself, it will consume a lot more energy, potentially jeopardising national and international climate targets.
For the time being, regulators will continue to sanction cryptocurrency mining in order to protect the electricity sector. Finally, cryptocurrency mining will have to intensify its exploration and use of renewable energy in order to remove one of the thorns in the regulator’s flesh, potentially allowing them to consider cryptocurrencies like Bitcoin as legal tender.