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- The unique architecture of Cryptocurrency makes it energy-intensive
- Anonymity makes quantification of energy needs impossible
- Heavy impact on the environment
In earlier times, Cryptocurrency remained in the zone of fringe technologists. However, in recent times, the vast rise in the value of cryptocurrencies like bitcoin, it’s now mainstream and adorns the front pages of most finance-related news magazines and newspapers. The crypto trade has a unique architecture, and it also consumes a lot of energy. Therefore the pertinent question-what is its impact on the environment.
What is Cryptocurrency?
Cryptocurrencies like Bitcoin and Etherum are already prevalent. Others such as Cardano and Nano are also well known. These are decentralized and are not controlled like the US Dollar or the Japanese Yen.
New coins are generated through ‘crypto mining. Powerful computers solve complex problems and earn Cryptocurrency as rewards. Cryptocurrency is based upon blockchain technology, and there is a distributed digital ledger that records all transactions. These transactions are then shared amongst the nodes of the network.
Electricity Usage
The energy required to keep this massive infrastructure working is immense. According to a report by BBC quoting Cambridge researchers, the energy required is in the order of 121.36 terawatt-hours (TWh), and it is not going to fall considering the increasing popularity of cryptocurrencies.
SiliconIndia.com, an influential website, reported that as the problems become harder to solve as the value of coins increases, powerful computational machines will still be used, further increasing electricity use. The paper adds that Visa does billions of transactions a year and only uses 50,000 terawatts in stark contrast.
Climate Impact
In the beginning, cryptocurrencies were mined by a hobbyist who used PCs at home. Today the process has been industrialized, and some miners are publicly traded. The most rural locations are rural China, where both labor, land, and electricity are cheap. However, the electricity comes from inefficient and polluting coal-based power plants. Thus the impact on climate is immense.
Difficult to monitor
One of the features of Cryptocurrency is that it is anonymous, making it difficult to trace and calculate the amount of electricity it uses. The economies of developing countries are booming, and cheap electricity and land are some of the most attractive facts that attract public mining companies to these nations. Eventually, better forms of energy will have to be used to run if the future of the financial system.
Andrew is a blockchain developer who developed his interest in cryptocurrencies while pursuing his post-graduation major in blockchain development. He is a keen observer of details and shares his passion for writing, along with coding. His backend knowledge about blockchain helps him give a unique perspective to his writing skills, and a reliable craft at explaining the concepts such as blockchain programming, languages and token minting. He also frequently shares technical details and performance indicators of ICOs and IDOs.
