The high levels of computing power required to mine cryptocurrencies worries environmentalists. The crypto mining business uses powerful computers that compete to verify transactions in exchange for tokens. A large amount of electricity is used to power complex algorithms. For this, non-renewable energy sources such as coal are used.
Cryptocurrency mining debate
It is not new, the debates about cryptocurrency mining through Proof of work are more. On the one hand critics and on the other pro-bitcoin who campaign in favor of this new consensus method.
According to a study of the Intergovernmental Panel on Climate Change (IPCC), global carbon emissions must be reduced by 43% by 2030, to limit the average temperature increase to 1.5 degrees Celsius. This means that if we want to have a sustainable future, we must act now and avoid climate catastrophe.
During 2022, the European Commission and Swedish regulators have discuss to stop proof-of-work (PoW) cryptocurrency mining activity. Although the European Parliament’s Economic and Monetary Affairs Committee voted against a full ban, it highlighted the environmental impact of PW mining.
Meanwhile, in the US, a group of more than 20 lawmakers, all Democratic members of the US House of Representatives, have signed a letter to the head of the Environmental Protection Agency (EPA). They insist on their concern about the impact of cryptocurrency mining on the environment. They claim that Bitcoin (BTC) mining activity was using an excessive amount of energy, but it was also affecting residents.
According to the data According to Digiconomist’s Bitcoin Energy Consumption Index, an online tool created by data scientist Alex de Vries, the carbon footprint of Bitcoin, the world’s largest cryptocurrency, is identical to that of New Zealand. Both activities release about 37 megatons of carbon dioxide into the atmosphere each year.
How does cryptocurrency cause environmental change?
To understand the problem, it’s important to describe what goes into creating a cryptocurrency like Bitcoin. Unlike fiat currency, which is regulated by central banks, Bitcoin transactions are tracked through a public ledger consisting of a network of computers around the world: blockchain.
Crypto “mining” is a process in which computer puzzles are deciphered to confirm transactions between users. Once validated, the transactions are then added to the blockchain. This process allows authentication to take place, after an energy-intensive process.
Another sector shaken by digital assets is the art world. These digital artworks made headlines. They are sold through the use of non-fungible tokens, more commonly known as NFTa type of collateral backed by the Ethereum blockchain.
In simpler terms, works are created or “created” through a process called proof of work (PoW). This concept guarantees a unique identity for each part. Since cryptocurrency mining has become a global industry, the electricity required to power those millions of computers has skyrocketed.
Developments to make cryptocurrency mining more environmentally friendly
It is unlikely that Bitcoin moves away from PoW. Thus, miners must find and confirm that they are using renewable energy for cryptocurrency mining activity. In 2022, Tesla, Block and Blockstream announced that they would build a solar-powered Bitcoin mining farm in Texas.
In recent years, we have also seen many projects move to more environmentally friendly consensus mechanisms as proof of stake (PoS). In this process, users stake their tokens to create validating nodes and verify transactions.
Ethereum, the second largest cryptocurrency by market capitalization, has completed its move to Proof of Stake. PoS represents a more environmentally friendly process. This will cause an astonishing drop of 99.9%. of Ethereum’s energy consumption.
Qtum, a PoS blockchain who gets the most out of bitcoin and ethereum. It offers faster and more secure transactions. It recently announced a partnership with Binance Charity to plant 100,000 trees. Indeed, it aims to become a completely carbon neutral protocol. As a PoS blockchain, it uses minimal energy. Planting trees, on the other hand, must offset the emissions caused by electricity to operate the validation nodes. Qtum estimates that 100,000 trees planted will offset all the emissions caused since the commissioning of its main grid in late 2017, and possibly more.
The Crypto Climate Agreement (CCA) has over 250 signatories, including Qtum. They are trying to become completely carbon neutral by 2030 and decarbonize the cryptocurrency industry by 2040.
The crypto industry is beginning to recognize the importance of reducing its carbon footprint. Responding to the need of the moment, it has already taken substantial action to reduce its carbon footprint. Environmental protection is a collective objective. Maintaining accountability through initiatives like the Crypto Climate Agreement (CCA) will help them reduce their emissions. There are several ways to achieve this carbon neutralitybut the industry will need a collective and dedicated effort to get there.
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