The Cost of Crypto on the Climate

Bitcoin and Ethereum, the two most popular cryptocurrencies, have lost roughly 55 percent of their value in the last six months. Bitcoin and other cryptocurrencies were designed to be used as digital cash. However, as speculative investments, they’ve grown in popularity. Some argue that regulation is required to keep the chaos at bay.

The US Federal Reserve and the Bank of England recently increased interest rates by the largest amount since 2000. Continuing COVID controls and Russia’s invasion of Ukraine have also sobered up the markets. Bitcoin was designed to be indifferent towards governments and banks, but investors are cutting sources of risk and dumping crypto.

The Price of Crypto on the Environment

Bitcoin, Ethereum, and Dogecoin, the most polluting cryptocurrencies, utilize roughly 300 terawatt-hours (TW/h) of mostly fossil-fueled electricity per year. Bitcoin has a carbon footprint of nearly 114 million tonnes per year, which is around 380,000 space rocket launches. Bitcoin, the most polluting “proof-of-work” cryptocurrency, uses 300 terawatt-hours (TW/h) of electricity per year. This is roughly equivalent to 380,000 space rocket launches or the Czech Republic’s annual carbon impact.

The network’s hash rate is the amount of processing power committed to Bitcoin mining. The network can find a new winner every ten minutes if the hash rate lowers for any reason, such as power outages or price declines. Each winner receives 6.25 newly created bitcoins as well as the opportunity to verify network transactions.

The cost of setting up the computers and the energy required to power them determines whether or not the guessing game is profitable. The majority of the world’s proof-of-work mining devices are powered by coal-fired power plants. With the price of Bitcoin declining, there should be less financial motivation to spend electricity mining Bitcoin. Surprisingly, however, the network’s hash rate is still near its all-time high.

The damage caused by Bitcoin mining disproportionately affects poor and vulnerable communities, as mining outfits and crypto developers take advantage of economic instability, weak regulations, and access to cheap energy. Locals wanting to use these resources for productive purposes can be priced out by Bitcoin miners. These communities also tend to face the sharp end of the climate crisis, which crypto mining fuels.

The crash shows that Bitcoin is useless as a mainstream means of exchange and as a reliable store of value, bringing most users far more pain than profit. Governments worldwide want to appear keen on cryptocurrencies as tools for economic growth. For the global climate and the economy, cracking down now will be a boon for everyone. But if environmental regulation efforts are not globally coordinated or far-reaching enough, crypto’s climate contagion will continue to grow.

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