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Cryptocurrency has had a rocky year, with a number of high-profile bankruptcies and the recent collapse of FTX, a crypto giant that was once worth $32 billion but now owes millions of creditors. While this instability is obviously devastating for investors and finance enthusiasts, it could actually have a positive impact on the environment.
The process of mining cryptocurrency, known as blockchain mining, involves the use of powerful computers to solve complex mathematical equations in order to add a “block” to the network and be rewarded with bitcoins. This process is energy-intensive, time-consuming, and only occasionally successful, and requires the use of large computers with cooling systems and specialized motherboards. These computers consume vast amounts of energy, typically obtained by burning fossil fuels.
According to a report by the White House, cryptocurrency mining is responsible for the release of 140 million metric tons of CO2 into the atmosphere each year, or 0.3% of all global greenhouse gas emissions. This is equivalent to the emissions produced by countries such as Argentina and the Netherlands. The competitive nature of blockchain mining also means that the resources invested by the vast majority of miners who do not win the reward are wasted. In order to increase their chances of success, miners often turn to the most readily available energy sources, including paying to revitalize struggling fossil fuel plants.
Crypto mining also has a range of other negative environmental impacts. The computer chips used in mining are made with toxic chemicals and precious metals that require mining to produce, leading to the depletion of finite resources and the destruction of landscapes. These chips also have a short lifespan, becoming quickly obsolete and often ending up in landfills as mining strategies evolve. In addition, crypto mining operations can create air, water, and noise pollution in the communities in which they are located, placing a burden on local residents and businesses while the crypto companies profit.
A study by Tufts University found that, compared to physical money, crypto incurs three times more environmental costs. Given that it is used far less frequently than cash, the potential for crypto to damage the planet as it grows as a currency is significant. This is particularly concerning given that many of the world’s major banks invest our money in the fossil fuel industry, contributing to the climate crisis. While all forms of money have some impact on the environment, the environmental costs of crypto are particularly high.
A crypto crash could have a positive impact on the environment by reducing the demand for energy-intensive mining and the release of greenhouse gases. It could also provide an opportunity to reassess the environmental impact of cryptocurrency and consider more sustainable alternatives. Benjamin Jones, an environmental economist, stated, “We find several instances between 2016–2021 where Bitcoin is more damaging to the climate than a single Bitcoin is actually worth. Put differently, Bitcoin mining, in some instances, creates climate damages in excess of a coin’s value.”
While the uncertainty surrounding the future of cryptocurrency is concerning for those invested in it, a crypto crash could be a win for the environment. It could provide a chance to shift away from environmentally harmful mining practices and towards more sustainable alternatives.
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