Failing Crypto Could Be a Win for the Environment
It’s been a turbulent year for cryptocurrency. Crypto giant FTX is just the latest in a slew of bankruptcies, collapsing spectacularly after a run on the company and a mad scramble to recover customer assets. Once worth $32 billion, it now owes up to a million creditors, a fact that has sent its former CEO and partners into crisis.
The uncertainty plaguing the crypto world is obviously devastating for investors and finance fanatics, but it could actually have a silver lining.
Cryptocurrency is terrible for the environment. And a crypto crash could have a positive impact on greenhouse gas emissions and the future of digital currency.
In order to make money with crypto, “miners” use supercomputers to solve complex mathematical equations before their peers. If they win this algorithmic race, they can add a “block” to the network and are compensated with bitcoins. This is referred to as “blockchain mining,” and it is energetically costly, time-consuming, and only occasionally rewarding.
Crypto mining used to be possible with a home computer setup, but as it’s been corporatized, it now requires massive computers with cooling systems and motherboards. This takes enormous amounts of energy, typically procured from burning fossil fuels.
According to a report by the White House, cryptocurrency mining accounts for 140 million metric tons of CO2 per year released into the atmosphere, or 0.3% of all global greenhouse gas emissions. This amount is greater than the emissions produced by many individual countries, including Argentina and the Netherlands.
The competitive nature of blockchain mining is also problematic. Barney Tan, professor of Information Systems and Technology Management at the University of New South Wales said in an interview, “…if 1,000 miners compete and only one would win the reward, the resources invested by the other 999 miners who lost are wasted.”
Because speed is so critical to winning the blockchain race, crypto miners are utilizing the most readily available energy sources. Earthjustice reports that some are paying to revitalize dying fossil fuel plants in order to get electricity faster.
And it’s not just greenhouse gas emissions. Computer chips used to mine cryptocurrency are made with toxic chemicals and precious metals that require literal mining to produce, ravaging the Earth’s landscapes and depleting finite resources. These chips are also highly specialized and quickly become obsolete, ending up in landfills as crypto mining strategies evolve.
Additionally, crypto mining operations can generate air, water, and noise pollution in the communities where they’re located. Local residents and businesses are forced to bear the burden while crypto corporations turn a profit.
Benjamin Jones, an environmental economist, said in a statement released by the University of New Mexico, “We find several instances between 2016-2021 where Bitcoin is more damaging to the climate than a single Bitcoin is actually worth. Put differently, Bitcoin mining, in some instances, creates climate damages in excess of a coin’s value.”
Granted, pre-existing monetary options are not without fault. The U.S. alone prints billions of cash notes every year, requiring immense amounts of water and electricity. Many of the world’s major banks invest our money in the fossil fuel industry, contributing to the climate crisis. All money has a role in harming the planet, but crypto still stands out.
Compared to cash, crypto incurs three times more environmental costs, according to a study by Tufts. And given that it is used far less than physical money, crypto has the potential to devastate the planet as it continues to grow as a currency.
That’s why the crash might not be such a bad thing.
Crypto bankruptcies mean less carbon emissions produced, and as attention turns to the fragility of cryptocurrency, more can be done to address the negative environmental impacts.
On November 22, in the midst of FTX’s catastrophic collapse, New York became the first state to ban crypto mining techniques that necessitate large amounts of energy.
The FTX crash also leaves a gap in the market for more sustainable crypto companies. Following the release of the White House report in September, Ethereum, the largest blockchain behind bitcoin, switched to a more eco-friendly mining strategy. This change could lower its carbon emissions by 99% in the next few years.
There are also up-and-coming cryptos, like solarcoin, that rely on renewable energy to power their mining. In the wake of this current crypto crisis, these sustainable alternatives have a better chance of succeeding.
Crypto’s vulnerabilities have been laid bare this past month. Although this collapse is heartbreaking for those who invested their lives into bitcoin, it has opened people’s eyes to the drawbacks of digital currency.
Sometimes failure can be a good thing. With sustainable mining strategies, a focus on renewable energy, and a better awareness of carbon emissions forthcoming, this cryptocurrency catastrophe could translate into a win for the environment.
Emma Lauterbach is an MA student in Ecology, Evolution, and Conservation Biology at Columbia University