Crypto may be on its way to going mainstream, but there are still a ton of questions about how its use will impact the environment.
At the moment, Bitcoin alone is using 0.58% of the planet’s electricity -- more than all of Argentina combined. Mining of this cryptocurrency produces 36.95 megatons of carbon dioxide annually. In 30 years, Bitcoin on its own could raise global temperatures by 2 degrees Celsius, or 35.6 degrees Fahrenheit.
Another thing to mention is e-waste. When mining machines are replaced with newer models, the older ones are pretty much abandoned. And because they can’t be recycled, they create damage instead.
“Every year mining pools update their millions of ASIC mining machines to newer models,” said Dr. Peter Howson, lecturer at Northumbria University with expertise in blockchain-based environmental management. “The redundant ones can’t be repurposed, so the hazardous e-waste is usually dumped on countries in the global south.”
Crypto's impact on the environment is not being taken lightly. On Wednesday, Elon Musk tweeted that Tesla would stop accepting purchases via Bitcoin, due to its effects on the environment. He said he will not return to using the cryptocurrency until its mining becomes more sustainable.
Since Musk's tweet, the total market cap for all cryptocurrencies dropped by around $365.85 billion, going from $2.43 trillion to $2.06 trillion.
But just like alternatives to sugar come rushing in to cheer up newly conscientious dieters, greener alternatives to crypto mining are starting to enter the picture.
In March, RubiX released its open-source public blockchain testnet availability as part of its Blockchain Green Initiative. The mechanism allows for cloud to chain migration. The only energy involved is from the computer.
“We created an architecture where everybody with a computer or cell phone or tablet, any smart devices, will be able to download a complete node, and will be able to mine and validate the coin,” said Nithin Palavalli, founder and CEO of RubiX. “We can make sure there is no external power being generated for this particular reason.”
Meanwhile, Ripple, the blockchain company behind cryptocurrency XRP, which in March ranked 4th in market cap, was the first crypto company to partner with EW Zero, an application which finds and sources emissions-free renewable energy. The company partnered with EW Zero in September, last year.
“The tool enables any renewable energy buyer to find and source procurement options from a wide variety of digital marketplaces across the globe,” said Monica Long, general manager of RippleX, Ripple’s open developer program. “It helps any blockchain to decarbonize, with the XRP Ledger being the first to utilize it last year.”
Ripple has also signed on to the Crypto Climate Accord, an agreement that aims to decrease crypto’s energy use. Others have signed on as well, including Coinshares and Web3 Foundation.
“We’re developing an action plan to ensure all of the world’s blockchains are powered by 100% renewables by 2025, because what’s good for the climate is good for crypto,” said Long.
But for now, the Crypto Climate’s Accord’s goals remain pretty vague. For example, companies are expected to “recognize that significant work remains to be done” and engage in “voluntary private-sector led action,” but there’s nothing about direct actions they need to take or things they must avoid. It’s all up to interpretation.
While crypto’s goals to become more eco-friendly still remain kind of blurry, one thing that is clear is that their use is spreading. More companies in the financial industry are opening their doors to the technology and giving their thumbs up. This is especially true for Bitcoin, which has gotten some pretty big cheers from crypto users and investors alike.
“Many Bitcoiners believe in crypto as the Holy Grail. Once all other forms of money and stores of value have been replaced by Bitcoin -- dollars, gold, everything -- the climate crises will somehow be resolved,” said Howson. “The opposite is true of course.”
And just like a few sips of diet coke, or even a green shake, can’t make up for the effects of a bad diet, greener crypto solutions or pro-environment crypto coalisions can only do so much.
According to Northumbria University's Howson, what's really needed is firmer regulations around crypto use.
“Bitcoin is not something that is just a little bit dirty, something we can tolerate. It presents an existential threat to humanity," said Howson. "Even if we decarbonise our cities and industries effectively over the next decade, Bitcoin still pushes us over the 2 degrees of warming threshold that scientists agree could trigger a runaway greenhouse effect.”
Still, just like banks and other financial institutions are making moves to become greener, cryptocurrency companies may also get carried by the green finance trend. It does seem to be what the consumer wants.
As an example, in July last year Rocky Mountain Institute, a nonprofit for clean energy, launched the Center of Climate Aligned Finance in collaboration with Bank of America, JP Morgan and Goldman Sachs.
According to Ripple's Long, crypto needs to go in this direction as well.
“Global finance has already turned its attention to sustainability,” said Ripple’s Long. “As crypto becomes more mainstream, it’s important the industry take action now versus reverse engineer later.”