Unlike the traditional and legal tenders of currencies such as coins & notes being used around the globe, Cryptocurrency is no longer an unknown term as we are escalating towards the global digitization era. In the simplest term, Cryptocurrency is a decentralized currency that has a digital presence that is used for online secure transactions. Crypto’s origin dates back to 2008 when a group of people (currently known under the pseudonym Satoshi Nakamoto) created the guiding principles of the first and leading cryptocurrency in the market today which is known as Bitcoin.
As we are witnessing a major surge in the global interest in Cryptocurrencies, it may be considered a legal tender for transactions across the globe in the near future. According to a recent report by Globenews wire, the adoption of cryptocurrency saw a surge by more than 880 per cent between July 2020 to July 2021. Recently, India also recognized these digital assets when the Union Budget 2022 levied a 30% tax on profits. But, the road to legalizing crypto is still unclear.
But as far as global acceptance is concerned the future of Crypto is looking brighter. International brands such as AT&T, Home Depot, Microsoft, Starbucks and Whole Foods now accept payments in Bitcoin which is the most popular cryptocurrency in the market. Paypal 2021 also announced it will allow its US consumers to use cryptocurrency to pay its millions of online merchants.
This surge in interest could be justified by the advantages Cryptocurrency brings to the table. The transactions done by Crypto are private and secure as the blockchain technology ensures users' anonymity. They are also hugely popular among investors as the scarcity of Crypto makes them a good long-term investment option.
Why is Crypto a threat?
Despite these privacy features and monetary future benefits and other aspects in favour of Cryptocurrency, there is a negative side to these digital assets that can’t be ignored. To understand how these virtual assets are affecting the climate an understanding of how crypto works is necessary.
These virtual currencies have a virtual and intangible presence but in order to capture a cryptocurrency, a process of mining is involved. Mining is an energy-intensive process through which the new cryptocurrencies are generated by solving complex mathematical puzzles over specially equipped computer systems. This process could take up to 30 days to complete and during the course, a huge amount of energy is consumed and leaves a massive carbon footprint.
Crypto & carbon footprint
As per the reports from the University of Cambridge, it has been stated that Bitcoin mining consumes as much energy as Sweden and its increasing demand in the crypto market is signalling more drastic impacts. Another report published in the Nature Climate Journal said that if Bitcoin is adopted widely it could produce “enough carbon dioxide emissions to warm the planet above 2 degrees Celsius”. The December 2021 figures from the Cambridge Bitcoin Electricity Consumption Index, Bitcoin accounts for about 0.52 per cent of the total global electricity consumption which is equivalent to the annual power consumption of Thailand.
Crypto mining requires huge servers and supercomputers and a miner could take up to 30 days of constant work to successfully mine single crypto which consumes a massive amount of energy and hence leaves a significant carbon footprint. China is the leading carbon emitter through Bitcoin mining in the world. The data shared by Nature journal reported that the annual energy consumption of the Bitcoin blockchain in China is expected to peak in 2024 at 296.59 Twh and generate 130.50 million metric tons of carbon emission correspondingly. “Internationally, this emission output would exceed the total annualized greenhouse gas emission output of the Czech Republic and Qatar.”
Way Forward
The growing demand and the surging prices of crypto especially Bitcoin are motivating miners to solve complex mathematical puzzles to earn this digital asset. This could directly affect the global carbon footprint, highlighting the same Reuters report that “Bitcoin production is estimated to generate between 22 and 22.9 million metric tons of carbon dioxide emissions a year”.
To avoid this inevitable circumstance a shift to energy resources is a need of the hour. There are growing attempts in the cryptocurrency industry to mitigate the environmental harm of mining and the entrance of big corporations into the crypto market could boost incentives to produce "green bitcoin" using renewable energy. Projects from Canada to Siberia are looking out for ways to mine bitcoin from renewable such as hydropower.
The climate activists organization Environmental Working Group highlighted that Bitcoin could reduce its energy consumption by 99% through a simple change in the coding pattern. The proposed “Proof-of-Stake” software code is already being used by Ethereum and is believed to reduce energy consumption by 99.95%.
Manvender is a passionate content creator with a journalism degree who has a knack for developing human-interest content. In the past, he was involved with a National News Channel and a video production company and has experience in writing, designing and video production.
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Technology is a useful servant, but a dangerous master, it was rightly said. Electronic devices have grown into an inevitable part of our daily lives.
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