Want to know whether Bitcoin and other cryptocurrencies are sustainable? Then you've come to the right place! Digital currencies have revolutionized the world of finance. Decentralized blockchain technology provides more security and is more transparent. But Bitcoin & Co. also have disadvantages. In addition to the extremely volatile financial investment, there is one aspect that is often underestimated or even forgotten by many people: the negative impact on our planet.
The critical voices mainly refer to the high electricity consumption and the associated climate-damaging CO2 emissions. As we are striving together to reduce our Investing money as sustainably as possibleThe following question therefore arises: How environmentally friendly or harmful are cryptocurrencies?
In this article, I would like to give you an answer to this question and provide you with the most important facts about the sustainability of Bitcoin and some other digital coins. Let's go!
Here you can find a short overview in advance:
Background: What is Bitcoin - and what are cryptocurrencies?
Bitcoin (BTC) is the first and nowadays also the best known of countless cryptocurrencieswhich is a digital means of payment based on a blockchain system. As can be seen from the Bitcoin price in dollars the value of the currency fluctuates greatly compared to traditional currencies.
But how does the system work? While central banks print and manage the money in traditional currency systems, cryptocurrencies such as Bitcoin are decentralized and are generated and managed by so-called miners. They decipher complicated mathematical puzzles on their computer and are rewarded financially in Bitcoin if they are successful.
Thanks to a consensus mechanism, new bitcoins can be securely legitimized be made. The individual transactions are then formed in blockswhich are attached to the end of the continuous ledger - the blockchain - which in turn is publicly viewable and unchangeable.
There is therefore a motivating incentive that makes the entire decentralized network more secure. The more people participate, the more secure it is, as the Computing power and information distributed across many different network members are.
The process is called Mining and the algorithm behind it is called Proof of Work. Although the Bitcoin blockchain is safe from hacker attacks, it is detrimental to environmental sustainability.
Environmental impact: Why is Bitcoin considered harmful to the environment?
The puzzles mentioned in the huge worldwide data network are becoming increasingly difficult over time, competition is growing due to the popularity of Bitcoin, mining is becoming more demanding - and electricity is more likely to be wasted.
The Required computing power which is provided with specialized hardware, so-called ASICs (Application-Specific Integrated Circuits), has always been very high, but is increasing every day. Therefore increasingly powerful computers needed.
The High power consumption of energy-intensive miningThe "mining" of new bitcoins is the main criticism of cryptocurrencies in terms of sustainability.
And even if the proportion of renewable energies mining, a large proportion of the electricity still comes from fossil sources, such as Coal and natural gas. Many mining farms are operated in countries with cheap but not green energy.
It is therefore above all the emitted CO2 Emissionswhich massively impair the sustainability of Bitcoin and other proof-of-work coins - and ultimately the Climate Change Accelerate.
In addition, the high-performance computers have a high space requirement and need a lot of water for cooling.
Statistics: What facts and figures are there on the sustainability of cryptocurrencies?
I can make statements about the environmental impact of cryptocurrencies such as Bitcoin using the following Facts and figures prove it:
- To around 125 terawatt hours is the estimated annual electricity consumption of the Bitcoin network. Bitcoin therefore needs more electricity than many countries, such as Ukraine.1
- About 1,449 kilowatt hours of electricity are required for a single Bitcoin transaction. This amount of energy corresponds to what an average US household consumes in about 1 1/2 months.2
- Around 90.93 million tons of CO2 is generated by the Bitcoin network each year. That is around twice as much as the whole of Switzerland emits.3
- To 12 billion US dollars estimates the value of global Bitcoin climate damage in the study period from 2016 to 2021. A single virtual coin is also expected to be worth 126 times more CO2 released than at the beginning.4
- Around 330,000 Olympic swimming pools could be filled with the annual water consumption of Bitcoin.5
- Around 54.5 percent of the electricity used for Bitcoin mining now comes from renewable energies.6
Opportunities: How can Bitcoin & Co. become more sustainable?
The carbon footprint and the ecological footprint of Bitcoin are therefore bad - but the Basic idea of a decentralized currency holds the potential for a better and fairer world.
How could the serious ecological consequences of cryptocurrencies so minimize it? Here are a few findings from my research:
- Renewable energies: Mining farms can switch to renewable energy sources such as solar, wind and hydroelectric power. This is an essential key to making the Bitcoin mining process more sustainable. save CO2.
- Carbon offsetting: Crypto platforms, miners and investors should live up to their responsibility and offset their own carbon footprint by investing in climate-friendly compensation projects.
- More energy-efficient algorithms: The biggest lever is that cryptocurrencies are switching to less energy-intensive consensus mechanisms. In other words, from Proof of Work (PoW) to Proof of Stake (PoS).
Alternatives: What green cryptocurrencies are there that are already more sustainable than Bitcoin?
At present, it is therefore absolutely impossible to say that Bitcoin is sustainable. But there are actually some Sustainable cryptocurrencieswhich do not require the massive climate-damaging energy consumption of the "crypto train horse".
In particular, the second-largest cryptocurrency, Ether (the system behind the Ethereum) to Proof of Stake. Network participants deposit their crypto coins to support the consensus mechanism. The more coins, the greater the chance of receiving staking rewards. And the personal risk in the event of a mistake ensures security.
Ethereum was thus able to expand its own Energy consumption with the adjustment by reduce about 99.95 percent.
Here are some Other digital currencies that are much more sustainable or even specially developed to create an ecologically responsible alternative and environmentally friendly development environment:
- Algorand (ALGO): relies on Pure Proof of Stake and has a partnership with ClimateTrade in order to optimize its own CO2 emissions. The team wants to be the first blockchain with a negative carbon footprint.
- Cardano (ADA): Also uses Proof of Stake and is therefore much more energy-efficient than Bitcoin. Founder Charles Hoskinson's team is also cooperating with a reforestation project in Kenya. Over one million trees have now been planted in CardanoForest.
- Solarcoin (SLT): Solarcoin also relies on proof of stake. The team also rewards solar power producers with coins and thus encourages the use of clean energy.
- Nano (XNO): The team behind Nano relies on an environmentally friendly system known as Open Representative Voting (ORV). This allows up to 1,000 transactions per second to be processed with low energy consumption.
Are cryptocurrencies sustainable? It depends!
Digital currencies such as Bitcoin are not world saviors and any canonizations Greenwashing. Nevertheless, they can Changing the monetary system for the better - and in an increasingly sustainable way.
In addition, the Blockchain technology The EU has great potential to make our cooperation fairer and less risky. For example, it can reduce corruption and bureaucracy, improve the Global trade more secure and supply chains more transparent.
However, the criticism of digital coins is mainly due to the massive energy demand more than justified. Accordingly, it is important to always scrutinize cryptocurrencies. As an interested, environmentally conscious investor, you should tend to opt for sustainable cryptocurrencies if you are interested.
"The greatest threat to our planet is the belief that someone else will save it."
Robert Swan (more at Environmental protection quotes)
I hope this article gives you valuable insights into the sustainability of the crypto world. Do you have any questions, suggestions or important information that is still missing here? Then I look forward to your comment!
Stay sustainable,
PS: In another article I investigated, How sustainable streaming services are. So if you're interested, take a look there next!
References:
- R. Bocksch: Bitcoin's electricity consumption exceeds that of Ukraine (09.02.2022), available at https://de.statista.com/infografik/18608/stromverbrauch-ausgewaehlter-laender-im-vergleich-mit-dem-des-bitcoins. [01.08.2024]. ↩︎
- N. Kolesnikov: 60+ statistics on Bitcoin mining and energy consumption in June 2023: everything you need to know (as at 16.01.2024), available at https://www.techopedia.com/de/60-statistiken-zum-bitcoin-mining-und-energieverbrauch-im-juni-2023-alles-wissenswerte. [01.08.2024]. ↩︎
- Salzburger Nachrichten: 90.93 million tons of CO2 per year caused by Bitcoin (as of 13.04.2024), available at https://www.sn.at/wirtschaft/welt/millionen-tonnen-co2-jahr-bitcoin-156704125. [01.08.2024]. ↩︎
- ZDF: Study on the mining of bitcoins: virtual mining increasingly harmful to the climate (as at: 02.10.2022), available at https://www.zdf.de/nachrichten/wirtschaft/bitcoins-schuerfen-kimaschaedlich-100.html. [01.08.2024]. ↩︎
- United Nations University (UNU): UN Study Reveals the Hidden Environmental Impacts of Bitcoin: Carbon is Not the Only Harmful By-product, available at https://unu.edu/press-release/un-study-reveals-hidden-environmental-impacts-bitcoin-carbon-not-only-harmful-product. [01.08.2024]. ↩︎
- Yahoo Finance: Bitcoin mining's green mile - 54.5% sustainable energy use, available at https://finance.yahoo.com/news/bitcoin-mining-green-mile-54-181636923.html. [01.08.2024]. ↩︎
