How destructive is energy-intensive crypto mining?  

Summary

  • Cryptocurrency miners have swarmed the network, attracted by the skyrocketing prices of many cryptocurrencies. 
  • The Bitcoin mining process involves high energy consumption, causing a significant threat to the environment.
  • The use of application-specific integrated circuits (ASICs) for mining algorithm adds to the electronic waste problem.  

Once scorned upon for being the instrument of criminals and speculators, cryptocurrency seems to have emerged as the dark horse of the financial markets, with investors falling head over heels in love with its growth potential. 

The limited supply of crypto tokens (like bitcoin capped at 21 million) and their growing utility have created a scenario similar to gold rush, with Bitcoin mining charming investors with its magnetic appeal. In what further accelerated the crypto’s march to the mainstream, El Salvador became the first country to adopt Bitcoin as legal tender, signalling at  growth prospects of the crypto coins. 

MUST READ: Is pandemic the real reason behind the ‘Bitcoin Boom?’

However, not all is good about the mining process as the investors looking at bitcoin through rose-tinted glasses fail to perceive its negative implications. The International Monetary Fund (IMF) has pointed out a series of macroeconomic, financial, and legal downsides for using such forms of decentralised currency as legal tender. 

Apart from the costly and sporadic rewarding nature, the cryptocurrency mining process has started to alarm global communities with its detrimental environmental impacts. For example, after its so-called sensational plan to invest billions in Bitcoin, Tesla took a U-turn and suspended Bitcoin payments due to the harsh environmental effects of mining. 

Significantly, the mining process runs on an energy-intensive network, thereby posing significant environmental issues. Furthermore, the energy used is primarily sourced from fossil fuels. 

Source: Copyright © 2021 Kalkine Media

ALSO READ: Factors to Evaluate Before Including Bitcoin in Portfolio

Energy-intensive mining process

While crypto mining seems to be increasingly rewarding with the skyrocketing crypto prices, the process has seen a significant increase in energy consumption in the recent decade. 

As per the estimates, Bitcoin mining has an annual electricity consumption comparable to that of many nations. Furthermore, the process generates a significant amount of CO2 annually. 

The entire crypto mining system is heavily dependent on electricity produced from fossil fuels, which for decades have been the guilty party for generating greenhouse gases and causing climate change. Meanwhile, miners have swarmed the network with an increase in crypto prices, such as Bitcoin and Dogecoin, increasing the amount of energy consumed. 

However, not all cryptocurrencies can be associated with detrimental environmental consequences, primarily when they use Proof of Stake blockchains, which require energy similar to that used by an ordinary computer network.

Source: Copyright © 2021 Kalkine Media

ALSO READ: Can Dogecoin make millennials rich? How much would it be worth by 2030?

Electronic waste remains another critical issue

The account balances for cryptocurrencies are recorded in a distributed network of miners and require complex, specialised computers, releasing significant electronic waste annually in the global ecosystem. 

While Bitcoin mining initially used everyday computers, miners gradually moved towards adopting application-specific integrated circuits (ASICs) for performing mining algorithms.

Significantly, the Proof of Work algorithm in a blockchain network involves intense competition among miners to complete the transactions on the network. The cut-throat competition further continues to intensify as more and more Bitcoins are mined, leading to growing complexity for solving the cryptographic hashes. 

Moreover, the reward coins for mining are halved every 2.1 million blocks, further intensifying miners' competitive struggle. 

The tough competition has triggered a race among the miners that have been focused on attaining the most powerful ASICs for mining new crypto coins. Thus, a newer version of ASICs is released from time to time, pushing out the previous unprofitable ones which quickly grow obsolete. But unfortunately, the system cannot be reused for other purposes, generating a significant amount of e-waste. 

With the world already dealing with mounting e-waste issues, the decentralised currency further adds a burden on the natural process to combat the problem. 

How cryptocurrency advocates defend the mining process

As cryptocurrency mining process is strongly dependent upon energy consumption, it has stirred up heated debates about its sustainability impacts. The advocates of cryptocurrency mining back the operation, highlighting the usage of renewable energy to power the process. 

Source: Copyright © 2021 Kalkine Media

However, renewable energy might pose challenges for mining operations, causing obstructions due to changing weather patterns. Therefore, conventional energy sources might end up being the go-to sources for the mining process. 

Meanwhile, many facilities in rural China run on coal-based power systems, which generate a significant amount of CO2 and other greenhouse emissions. 

Proponents of cryptocurrency, however, assert that the mobility of the overall mining process enables not exhausting the resource of any particular destination. Significantly, cryptocurrency mining operations are concentrated around areas that have abundant renewable energy resources. Meanwhile, in the event of depletion, miners can move to energy-rich regions. 

With the world already fighting a battle to curb energy consumption from critical activities, it remains highly debatable if the global community should expend the resources on the mining process, not recognised as legal tender globally. It remains to be seen if the recent changes and concerns boost new trends or stifle the journey of cryptocurrency.  


Disclaimer
The content, including but not limited to any articles, news, quotes, information, data, text, reports, ratings, opinions, images, photos, graphics, graphs, charts, animations and video (Content) is a service of Kalkine Media Pty Ltd (Kalkine Media, we or us), ACN 629 651 672 and is available for personal and non-commercial use only. The principal purpose of the Content is to educate and inform. The Content does not contain or imply any recommendation or opinion intended to influence your financial decisions and must not be relied upon by you as such. Some of the Content on this website may be sponsored/non-sponsored, as applicable, but is NOT a solicitation or recommendation to buy, sell or hold the stocks of the company(s) or engage in any investment activity under discussion. Kalkine Media is neither licensed nor qualified to provide investment advice through this platform. Users should make their own enquiries about any investments and Kalkine Media strongly suggests the users to seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice), as necessary. Kalkine Media hereby disclaims any and all the liabilities to any user for any direct, indirect, implied, punitive, special, incidental or other consequential damages arising from any use of the Content on this website, which is provided without warranties. The views expressed in the Content by the guests, if any, are their own and do not necessarily represent the views or opinions of Kalkine Media. Some of the images/music that may be used on this website are copyright to their respective owner(s). Kalkine Media does not claim ownership of any of the pictures displayed/music used on this website unless stated otherwise. The images/music that may be used on this website are taken from various sources on the internet, including paid subscriptions or are believed to be in public domain. We have used reasonable efforts to accredit the source wherever it was indicated as or found to be necessary.