All it took was for Elon Musk to point out that cryptocurrencies come at a great cost to the environment, for all the hype and excitement to subside, common sense to prevail and a bit more attention be given to how much energy these crypto coins do consume. It was in March that Tesla had said they’d accept Bitcoin as a mode of payment for buying their electric cars. No longer. The reason—the increased energy usage as Bitcoins and cryptocurrencies are mined and transactions are done. The thing is, these digital currencies require really powerful computers in a mesh, and these require electricity. The data speaks for itself. The University of Cambridge and the International Energy Agency numbers indicate a significant spike in 2021 for the Bitcoin energy consumption levels. It isn’t just Bitcoin that isn’t green. Are there any environmentally friendly cryptocurrencies?
To be fair, we really have to go with a mix of what the crypto claims are and what the data shows, for networks for which energy consumption data is available. On January 1 last year, the Bitcoin energy consumption index suggests a high of 125.42 TWh, or Terawatt-hour, in power consumption. Simply put, 1 Kilowat (kW) is equal to 1000 Wh, or watt-hour. And 1,000,000,000,000 Wh is equal to 1 TWh. For perspective, Scotland which has a population of around 5 million consumes around 25 TWh of electricity every year. Bitcoin mining and transactions used 5X more. And that’s before things really spiked since the start of the year. The same data suggests that on May 13, 2021, the Bitcoin network consumption pegged at 151.16 TWh with a peak of 519.96 TWh consumption. You get the idea, I’d hope.
Hating on Bitcoin for guzzling electricity would be fallacious, and selective at best. To understand how a lot of cryptocurrencies work, we’ll still take the example of Bitcoin, but to illustrate without complex terminology why cryptocurrency networks in general guzzle energy. The thing is, digital currency such as Bitcoin isn’t owned by one authority and the decentralized system means it needs a network of computers around the globe working at capacity to complete complex calculations to mine new coins and complete transactions with existing crypto coins. This is also known as proof of work (PoW). This usually runs for hours, if not days. The faster a computer does these calculations, the quicker the process moves—but at the same time, a powerful computer with a fast processor and graphics card, will also dial up the energy requirements. Just to add to this here, it was in February that we had reported how Nvidia, a brand popular with gamers for their graphics cards, had rolled out a driver update for one of their latest cards because crypto miners were attempting to buy this in hoards which left gamers with an out-of-stock situation. The attempt was to cut down the hash rate (mining efficiency) of the RTX 3060 in half for Ethereum miners, to make this card less attractive to crypto miners and will allow gamers to buy these instead.
Ethereum, the second most valuable and popular cryptocurrency after Bitcoin, is rising up the consumption ladder as fast, if not faster. That being said, the Ethereum network could be making the switch, sometime later this year, from the PoW system to what is claimed to be a more efficient Proof of Stake system. At this time, data from Digiconomist collected for the Ethereum Energy Consumption Index says that Ethereum consumes electrical energy that is comparable to the power consumption of Hong Kong and the resulting carbon footprint is comparable to that of Lebanon. Every single Ethereum transaction consumes the energy that is equal to the power consumption of an average US home over a period of 2.82 days. The carbon footprint for a single transaction? Same as you watching 6,610 hours of YouTube videos.
Could there be a shift starting with the new cryptocurrency, Chia? The creation of the founder of BitTorrent, Bram Cohen, there is a big difference in how Chia operates compared with the likes of Bitcoin, Ethereum, Litecoin, Dogecoin, Bitcoin Cash and others. The Chia Network works on something called “farming” and not mining. The details suggest this uses proof of space and time, and not PoW which uses extreme energy. Instead of running the processor and graphics cards at high power settings, Chia will use the unused space in your PCs storage drive to farm the currency. The other advantage for crypto enthusiasts is that you’d not have to spend on a faster processor or graphics card—just a storage that’s quick enough for farming. The result is, much lesser energy consumed than Bitcoin or Ethereum.
There are projects which want to change all the heavy power consumption by cryptocurrency. Neptune Digital Assets, a cryptocurrency mining company in Canada is working on the “clean energy Bitcoin” project with another cryptocurrency mining firm Link Global Technologies, and the attempt is to use renewable sources such as solar, wind and natural gas to power Bitcoin. “Green power is getting cheaper and cheaper. But there has to be a push for more renewable energy sources for Bitcoin mining,” said Cale Moodie, CEO, while speaking with Global News. The problem has a part of its roots in China, which accounts for a large demographic of miners. These businesses use coal for a large part of the year, because it is cheaper.
In the meantime, Elon Musk and Tesla will be holding on to their crypto coins, in the hope that using them becomes a lesser load on the environment we live in. “Cryptocurrency is a good idea on many levels and we believe it has a promising future, but this cannot come at great cost to the environment,” says Elon Musk. To be fair, the cryptocurrency load on the environment will have a lot to do with the energy sources being used by miners. A lot like how and where people plug in their electric cars, isn’t it?