It’s no secret that cryptocurrencies are being targeted by eco-activists for harming the environment. Indeed, cryptocurrencies do have an impact on the environment. This is especially true for cryptocurrencies that use the PoW consensus algorithm supported by mining. 

Let’s try to understand how valid the criticism of mining due to environmental concerns is and what trends in energy efficiency can be observed in bitcoin mining so far. 

Environmental Issues of Cryptocurrency Mining

The essence of mining is to perform resource-intensive computations to validate transactions and create new blocks on the blockchain. Bitcoin mining is a complex and precise process that places high demands on both the equipment that performs the computations and the miners (or mining companies) themselves. Every four years, the compensation for miners on the bitcoin network is halved, and the equipment needed to mine coins becomes more sophisticated and energy-intensive. In other words, today’s miners face the daunting task of reducing costs while increasing complexity and decreasing potential profits. 

The high energy consumption of bitcoin mining harms the environment, primarily by increasing greenhouse gas emissions into the atmosphere. According to environmental activists, the environmental impact of crypto mining contributes to global warming and rising sea levels. 

Yes, bitcoin consumes about 100 TWh and generates a carbon footprint of about 65 million tons of CO2 annually (these figures fluctuate from year to year). And yes, these parameters are comparable to the energy consumption and emissions of smaller nations (such as Finland, Pakistan or Cyprus).

But if we evaluate the impact of mining on global warming or other climate changes that mankind has been trying to fight for the last decades, the carbon emissions from bitcoin mining are only about 0.2% (!) of the global ones.

At the same time, bitcoin tends to be more and more green, energy efficient and energy sustainable, despite controversial and differently interpreted indicators. Currently, according to various estimates, at least 55% of the energy used to mine the first cryptocurrency comes from renewable sources. Incidentally, bitcoin has also been recognized as compliant with ESG’s set of standards for social responsibility, which includes measuring a project’s environmental impact. This validates the social responsibility of bitcoin crypto mining, which helps stabilize the power grid and promotes the use of renewable energy.

Environmental Impact of Mining vs. Technology 

For clarity, a comparison can be made with the largest technology companies in the United States. Their carbon footprint far exceeds the emissions of cryptomining. Specifically, the U.S. company Amazon alone leaves a larger carbon footprint than the global mining of the first cryptocurrency. And if critics like to compare bitcoin mining’s environmental footprint to individual countries, what is wrong with comparing it to the footprint of local companies focused on new artificial intelligence technologies?

So, information based on publicly reported data:

• Amazon — 71.54 million tons of CO2 for 2021;
• Apple — 15.6 million metric tons for 2023;
• Microsoft — 15.3 million tons in 2023;
• Google — 14.3 million tons in 2023.

Most likely, this data can at least slightly shift the vector of environmentalist outrage from reducing the carbon footprint of cryptomining to the environmental damage caused by the development of artificial intelligence technologies.

Proof-of-Work vs. Proof-of-Stake: Environmental Considerations

There are a number of algorithms on the blockchain market for achieving consensus in blockchain networks, but they are mostly modified solutions based on two of the most well-known – Proof-of-Work (PoW) and Proof-of-Stake (PoS).

Both technologies offer decentralization and security, but they are implemented in very different ways. As a result, there are fundamental differences in performance, energy consumption, and environmental impact. 

• The Proof-of-Work mechanism requires network participants (miners) to perform complex mathematical calculations to complete transactions and create new blocks. They require powerful computing equipment that consumes a significant amount of electricity. 
• The Proof-of-Stake algorithm is a sustainable alternative to cryptocurrency mining — it does not require complex computations, and the power consumption of blockchains with PoS is 99.9% lower than that of blockchains using PoW mechanisms. Consensus in these types of networks is achieved by staking tokens in the network to validate transactions. 

Environmentalists regularly raise questions about the need to transition the Bitcoin network to the proof-of-stake algorithm, but developers have not yet reached a consensus on the feasibility of this step. Bitcoin is currently emphasizing the adoption of green cryptocurrency mining technologies, such as

• Finding and implementing the use of renewable energy sources in mining;
• Using surplus energy for mining;
• Using carbon credits.

Green Technologies in Cryptocurrency Mining

Earlier this year, the CH4-Capital fund published a research report on the current situation in mining. It cited that the share of green energy used for BTC mining grew by 3.6% last year to 54.5%. Daniel Batten, co-founder of the fund, also noted that bitcoin mining is the only major industry that is virtually independent of fossil fuels, and that there is some positive momentum among bitcoin miners to divest from fossil fuels. According to his data, the share of dirty energy in bitcoin mining has decreased by 20% since 2021.

Mining & Renewable Energy: Solutions

Batten’s foundation specializes in technologies that extract energy from landfill methane. Notable projects inсlude Nodal Power, which has established a methane mining center in Utah and previously helped build two waste-to-energy plants in the United States. The CH4 Capital co-founder also highlighted the role of Tether Limited, a Tether issuer and major BTC investor, in investing in green mining throughout Latin America. 

Regulating the Environmental Impact of Mining

As the world’s first and largest cryptocurrency on which the entire digital asset market depends, bitcoin is attracting a great deal of regulatory attention. 

The impact of mining on the energy resources of individual countries can be both disruptive and positive, bringing innovation and stabilizing systems.

Overmining can bring both collapse and resilience to energy systems.

The story of the BTC mining ban in Iran and China ended with nothing. In announcing the ban, the authorities feared destabilization of the energy systеm. However, despite the total ban, nothing has been destroyed, Iran continues to mine nearly 5% of the world’s volume, and the PRC still occupies an honorable place among the world’s mining leaders.

There seems to be no end in sight for crypto mining in the world. Mining companies are finding a balance in working with authorities and environmentalists and continue to do their thing. 

Depending on location and climate, different renewable energy sources are more readily available in different countries, be it volcanic thermal, wind, solar, ocean, or river power. If fracking is banned in certain areas, it will migrate safely to other locations. 

As for the positive impact of mining — it can perfectly compensate for excess power generation in countries like Germany, for example. Excess power can also be a problem for governments, it turns out. Mining can be used to balance the energy fluctuations in the German power grid caused by the growing number of renewable energy sources or the favorable seasonality for increasing their production. By the way, Germany’s largest telecommunications network, Deutsche Telekom, is planning to offer services related to cryptocurrencies and is also developing a project to use excess energy from green sources through cryptomining. 

Another characteristic of cryptomining is excess heat. A successful example of using excess heat for heating is the project of the mining company Marathon, implemented together with the Finnish authorities. The Finnish city of Satakunta, with a population of more than 11 thousand people, is heated by heat from the mining plant. This is the first precedent of district heating from mining in the European uniоn. 

The future of mining: Environmental Perspectives 

Despite periodic waves of public discontent, analysts are gradually coming to an objective view of the “threats” posed by cryptocurrencies. 

The environmental sustainability of blockchain technology is not far off, as the level of threat to the environment is not so terrible, and one of the most high-tech communities is working to solve the problems of emissions and high energy consumption. In addition, mining companies need to keep costs down. They do this by moving toward sustainability and choosing green, renewable energy sources that are cheaper than traditional energy.

According to scientists at Cornell University in the US, bitcoin may even save the environment. As a result of the study, professors of energy systems concluded that mining can be one of the main factors that stimulate the world’s population to switch to renewable energy sources as soon as possible. Researchers explored ways to reduce the environmental impact of cryptocurrency mining while generating revenue that could be reinvested in promising sustainable energy projects. 

Researchers found that focusing on the proper siting of mining operations, which takes into account the intermittent nature of renewable energy supplies, yielded the best performance results. In this case, the incentive for miners to invest in clean energy projects will be to receive the right amount of energy.

Thank you for your attention. Invest safely and profitably!

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