The environmental costs of crypto

Cryptocurrency has emerged as a major buzzword of the 21^st century, gaining popularity at an extraordinary rate. Bitcoin is the most mainstream of all cryptocurrencies, with an estimated 95% of crypto owners and those with a rough knowledge of the topic having heard of it. Its price has surged in recent weeks, a development sparked by regulatory changes and an upcoming ‘halving’ that will reduce the pace at which it is supplied. Crypto has cemented itself in the currency scene, even being accepted as a form of payment by businesses such as Microsoft, Gucci, and even Burger King. Due to it being electronically based, many assume it is an environmentally friendly alternative to cash. This is far from the case, with the process of verifying many cryptocurrency transactions consuming vast amounts of energy and electricity as well as creating ‘e-waste’. The toll crypto has had on the environment has grown exponentially, consuming more energy than entire countries in previous years. Some countries and states have gone as far as banning it completely, whereas others have chosen to ignore its environmental costs. Regardless of whether policymakers are currently paying attention to e-waste, it must be addressed soon to prevent a climate catastrophe.

E-waste involves the discarding of electronic parts such as computer chips, motherboards, plugs, and even entire devices such as mobile phones. It is the fastest-growing solid waste stream in the world. Every year, millions of tonnes of e-waste is produced, and it can be a serious threat if not properly treated, disposed of, and recycled. Crypto contributes heavily to e-waste – ‘mining’ the process, for most cryptocurrencies, through which money is created and transactions are verified, produces 30,700 tonnes annually. This is the equivalent of 272 grams per transaction or, for reference, 100 grams more than the weight of an iPhone 13. Whether e-waste can be recycled is the most pressing issue as, when properly taken care of, parts can be reused or broken down to form alternative appliances.

From 2021 to 2022, Bitcoin mining consumed more electricity than the Philippines

Crypto mining limits the amount of e-waste that can be recycled as a majority of mining equipment is highly specialised to a single cryptocurrency. These specialised systems, called application-specific integrated circuits (ASICs), contribute to the fact that only 17% of e-waste can be recycled. Potential solutions to reduce e-waste are vague, with suggestions being to change the way crypto transactions are verified to a less computing-intensive system. However, minimal enforcement has occurred. In the long term, e-waste, similar to all forms of pollution, is a threat to the environment and our planet. Alex de Vries, the founder of Digiconomist – a publication that investigates the sustainability implications of crypto – stated: “E-waste represents a growing threat to our environment, from toxic chemicals and heavy metals leaching into soils to air and water pollutions caused by improper recycling.”

Unfortunately, the consequences of crypto mining doesn’t stop at e-waste. Crypto mining is extremely energy-intensive, with 62% of the electricity used coming from fossil fuels, mostly coal. Mining is part of the ‘Proof of Work’ (PoW) process which requires high levels of computing power as it entails the solving of complex algorithms and cryptic puzzles. The miner who solves these puzzles first is rewarded with new cryptocurrency, therefore increasing the supply. Miners who have the most powerful computers are able to solve the highest number of puzzles in the shortest time possible. However, the better the hardware is, the more energy it requires, consuming more and more electricity. From 2021 to 2022, Bitcoin mining consumed more electricity than the Philippines, and this consumption is predicted to rise even further in 2024. The need for policy implementation is at its all-time high right now, and given nearly 40% of all crypto miners are located in the United States, that would be an ideal place to start.

Proof of Stake requires vastly less computing power and therefore cuts electricity requirements by more than 99%, making it wildly more efficient

A potentially feasible route for the mining process would be to follow in the footsteps of another popular cryptocurrency, Ethereum which, instead of PoW, utilises ‘Proof of Stake’ (PoS). Rather than ‘mining’, where individuals compete to verify transactions, PoS involves the random selection of ‘validators’ who conduct this verification process. PoS requires vastly less computing power and therefore cuts electricity requirements by more than 99%, making it wildly more efficient.

Alongside this, an effort should be made to convert mining to use more renewable electricity sources as well as recycling heat where possible. The existing policy in America provides guidance. States like New York prohibiting Bitcoin mining altogether. However, others, like North Dakota and Wyoming, support the act by giving tax breaks to petrol producers in promotion of crypto. Unless there is a standardisation of existing policy, the efforts made by states and countries to regulate crypto mining will be obsolete. On top of government policy, there must also be a shift in consumer behaviour. However, as long as crypto mining is a profitable industry and is legal to carry out, miners will continue to consume vast amounts of electricity and create vast amounts of e-waste.