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Are cryptocurrencies really dangerous to the environment?

Energy consumption has emerged as one of the most contentious issues surrounding cryptocurrencies as a direct consequence of the widespread digital currency usage and popularity. Assuming that prices and user acceptance continue to grow at their current rates, cryptocurrency energy consumption will continue to rise in the future. There is no question that if greenhouse gas emissions continue at their current rate, there will be some adverse effects on global warming in the not too distant future.

Environmentally Friendly and Unfriendly Cryptocurrencies

Cryptocurrencies have an immediate negative impact on the environment. It is because of the energy-intensive processes involved with mining new coins and validating and recording crypto transactions on the blockchain. Each cryptocurrency’s amount of energy required to mine it is unique and determined by its consensus protocol. Some cryptocurrencies, such as Cardano (ADA) and Tron (TRX), use a proof-of-stake consensus protocol and therefore use relatively little energy. Hence, they are known to be environmentally friendly. Other cryptocurrencies like Bitcoin and Litecoin are renowned for being environmentally unfriendly because they are excessively energy-intensive. This exorbitant energy consumption is a result of their proof-of-work consensus protocol.

Why is Bitcoin’s energy use in the headlines so frequently?

Aside from discussions regarding its volatility, the media frequently discusses how Bitcoin’s mining process requires considerable energy. Bitcoin certainly consumes a great deal of electricity. Billionaires Bill Gates and Elon Musk both commented on China’s crackdown on bitcoin mining and its energy use. According to the Cambridge Bitcoin Electricity Consumption Index, Bitcoin mining consumes more than 145TWh (terawatt-hours) of electricity each year. This electricity mostly comes from the United States and Kazakhstan. In a report by Digiconomist, a website that analyzes digital currencies, the carbon footprint of Bitcoin is comparable to that of a small country like the Czech Republic. It is approximately 114.06 megatons of carbon dioxide. Even if Bitcoin is contributing to the development of a decentralized method of moving money, the mining of Bitcoin is causing problems in a variety of other ways. Bitcoin mining is known to endanger weak energy networks in countries whose infrastructures cannot handle high electrical activity. Apart from that, it contributes to the deterioration of the environment and the acceleration of global warming. More and more countries other than China are making bitcoin mining illegal. The list includes Bangladesh, Qatar, and Vietnam. Legislators in New York are also working on a bill that would ban new mining operations of proof-of-work cryptocurrencies like Bitcoin. It will also prevent existing facilities from renewing their permits for at least two years. The legislators believe that cryptocurrency mining operations will prevent New York from reaching its goal of reducing carbon emissions.

Efforts Made to Reduce Crypto Energy Usage

Switching from proof-of-work to a proof-of-stake mechanism used by cryptocurrencies can reduce the energy-intensive process employed. Mining new coins through staking makes ‘Proof-of-stake’ an energy-efficient consensus method. Staking requires validators to hold some of the cryptocurrencies they agree not to sell. Ethereum, the second-largest cryptocurrency after Bitcoin, is already making plans to upgrade to proof-of-stake. However, there are no signs that Bitcoin intends to make the same transition shortly. Green mining is another way of reducing the negative environmental impact of energy usage. That is mining cryptocurrencies with renewable energy. One of the commitments made to this effort is the establishment of the Crypto Climate Accord. This accord brings together over 200 companies, blockchains, and individuals associated with the cryptocurrency industry to work toward the goal of achieving net-zero emissions by completely transitioning to renewable energy by the year 2030. In the long run, a shift toward renewable energy sources worldwide could make green mining a viable option for reducing crypto carbon footprint.

   

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