Cryptocurrencies have created much discussion among investors due to their ability to diversify portfolios, drive growth and maintain value over a long time. The Bitcoin price USD has been on an ascending path over the past year and continues to grow ahead of the next halving. This is good news for hodlers, investors who keep their coins in the same wallets and wait for their worth to increase. However, ever since the beginnings of the digital finance market, there has been a pressing issue that continues to affect the environment: the toll the systems have on the environment.
Climate activists have discussed the issue before, and although there were discussions about the measures that should be implemented, there’s still plenty of room for improvements in the future. If you’re concerned about the possible toll your transactions might have on the environment, here’s what you need to know.
Honduras, New York and swimming pools
With talk of sustainability and eco-friendly practices becoming more commonplace as people understand the importance of reducing carbon footprint to mitigate the adverse effects on the environment, there’s been growing interest in the energy necessary to mint new crypto coins, as well as approve and manage transactions. There’s no denying the fact that the industry is a power-guzzler. To put things into perspective, studies have drawn comparisons between the energy consumption of cryptocurrencies to that of cities or countries to see how they stack up against each other.
For instance, a report released on December 1st, 2023 by the University of Cambridge revealed that, before its latest upgrades, the Ethereum blockchain had a greenhouse gas emission footprint of approximately the same as that of Honduras. The lack of centralized data has made some activists question whether the actual values are even more elevated, but investors believe that the crypto market is unfairly targeted as part of a censorship effort. According to them, many other industries out there consume just as much, if not more, resources without facing the same level of criticism.
Another study released on December 6th showed that Bitcoin mining used more water than New York City over the past twelve months and that predictions estimated that during 2024, the amount will climb to 591 billion gallons. Since 2020, the overall carbon footprint associated with the crypto appears to have soared by 278%. However, crypto analysts have also pointed out that the astronomical price must be regarded in the context of escalating water scarcity, especially in regions with strong mining operations, such as Kazakhstan and the western United States.
However, the fact that just one Bitcoin transaction uses sufficient water to fill a swimming pool shows that there’s still plenty of room for improvement and that solutions are still very much needed.
Renewables
The use of renewable energy sources has long been considered one of the best ways to mitigate the damage done to the environment and reduce carbon footprints. Many believe that the exact mechanism can be used to power crypto so that the environmental load will be lower. However, not all proponents of clean energy agree that mining is the thing that needs sustainable energy the most. In fact, some say that it’s important to remember that the supplies are limited in the amount of power they can provide per unit of time, albeit virtually inexhaustible. However, using them for energy-intensive processes such as crypto mining means that other areas will have to continue relying on fossil fuels to avoid the risk of blackouts.
Other analysts disagree, saying that the electricity demand from Bitcoin could potentially lead to increases in the capacity of renewable sources. There are also those who believe that the extra supply from renewable sources, whether solar, wind, geothermal or hydropower, could be employed to mine new currencies. Nevertheless, this also means that the system would probably have to become a little slower, which might not sit well with investors.
99%
The Ethereum blockchain has succeeded in slashing 99% of its emissions as part of a recent software upgrade. Before, the ETH environment had reached the 27.5 million level in tons of carbon dioxide equivalent. After the upgrade, the emissions were reduced to 2.8 kilotons, which is considerably lower, albeit still somewhere around as much as five round-trip flights from London to New York, which is 3,461 miles or 5,570 kilometers.
Yet, the fact that Ethereum succeeded in this regard has somewhat challenged perceptions that crypto is an environmental hazard by default and that there’s no way to make blockchains sustainable. In fact, the shift may act as a blueprint for the industry and signify the beginning of a new era. It seems clear that the fundamental systems must change to bring about real change. This shouldn’t be a surprise because it is the case for all other industries as well, from food and fashion to supply chains and tech.
If the world is to become more sustainable, things need to be changed for real.
Realistic change
But what would it take for crypto markets to change? You must remember that the systems are fully decentralized, meaning that any shift in the way the blockchain works would have to arrive due to a consensus discussion among the entire user and developer group. A fork of miners would also have to support the move to a proof-of-stake system. These concerns also extend to the larger Web3 space. There should also be real sustainability standards and goals that the market could achieve.
Without that, there’s no way that the markets could change. However, while it can seem like too much of a hassle to attempt this, many experts are concerned that there’s a chance this could happen and that there’s precedence. Some mining facilities have already begun deriving their energy from sustainable sources and recycling the heat the units produce, proving that many are willing to at least try it.
Cryptocurrencies have not yet become mainstream, but investors are dedicated to continuing to grow their portfolios. If you’re just getting started, make sure to pay attention to shifts in the marketplace. They could affect your gains and might require new strategies.
Saima Baig
I am a Chartered Environmentalist from the Royal Society for the Environment, UK and co-owner of DoLocal Digital Marketing Agency Ltd, with a Master of Environmental Management from Yale University, an MBA in Finance, and a Bachelor of Science in Physics and Mathematics. I am passionate about science, history and environment and love to create content on these topics.
