Cryptocurrencies and their Environmental Implications

Cryptocurrencies are digital currencies secured by cryptography: the practice of techniques used to secure the communication between a sender and recipient of a message or medium. This makes counterfeit close to impossible, and its users feel more confident in their transactions.

Cryptocurrencies are built upon decentralized networks that are based on blockchain technology. This means that instead of a unified and centralized bank, a transaction is kept in multiple locations at once and enforced by a network of computers. This record is called a blockchain: a set of connected blocks or online ledger. Cryptocurrencies are not issued by a central authority, ultimately rendering them immune to government interference or manipulation. Additionally, forging transactions is nearly impossible, which is part of their appeal.

Cryptocurrencies can be mined or purchased from cryptocurrency exchanges. Bitcoin, the most popular form of cryptocurrency, was invented in 2008. Today, there are thousands of cryptocurrencies on the market; however, there are very few countries that permit its use as legal tender for monetary transactions. As of December 2021, El Salvador is the only country that permits its regular use. However, it continues to rise to the mainstream; Bitcoin’s value has grown substantially since its inauguration in 2008. In fact, its value has even surged over the past two years.

There is a caveat to all of this innovation. Many forms of cryptocurrency are reliant upon mining, which requires hefty amounts of electricity. A majority of Bitcoin mining occurs in the United States, which accounts for 35 percent of Bitcoin mining activities. In addition, about 30 kilotons of electronic waste are annually produced as a byproduct of Bitcoin mining. This is a term used to cover items of all types of electronic and electrical equipment that have been discarded without the intention of reuse.

In 2020, the Bitcoin network consumed 131.80 TWh of power to execute the necessary processes in its mining. This is equivalent to the power consumed by various countries.

Cryptocurrencies are also cheaper solution in cross-border transactions, which often can rack up extensive fees. Some central banks are now allowing crypto exchanges to operate as transfer companies.

So, there are some benefits. And crypto isn’t going anyway anytime soon, as the industry is already worth $2 trillion. Thankfully, Bitcoin is currently developing a plan to transition to more sustainable mining methods. In a world suffering from multiple layers of climate change, we should not be focusing time and resources into making crypto the predominant currency until it has more sustainable mining alternatives.