A touted benefit of cryptocurrency, a form of digital currency, is removing intermediary costs and transferring financial control back to the users.

However, to function, digital currencies require substantial energy, equipment, internet access, and a significant global network infrastructure. Consequently, they leave a substantial ecological footprint, with some systems consuming energy comparable to smaller nations. Issues related to water usage and electronic waste are also associated with cryptocurrencies. Keep exploring to understand more about their environmental consequences.

The energy use of Bitcoin and other proof-of-work cryptocurrencies is vast—often more than that of some small countries. The United States, leading in Bitcoin mining, hosts over a third of its mining activities. Bitcoin mining, in turn, generates thousands of tons of electronic waste annually. Conventional financial systems, where only credit card usage data is available, consume energy similar to some non-proof-of-work blockchains.

The extent of energy usage for Bitcoin and cryptocurrency mining isn’t directly measurable, yet it can be estimated through network hashrates and the consumption of available mining rigs. The Cambridge Bitcoin Electricity Consumption Index approximates Bitcoin usage at 151 terawatt-hours annually, transcending Ukraine’s energy usage, as per 2022’s national energy metrics.

An alternate calculation by Digiconomist estimates it at roughly 98 terawatt-hours, equating to about 435.61 kilowatt-hours per transaction—the power usage of a typical American home in 15 days. Meanwhile, the second-largest crypto network, Ethereum, reportedly uses 5.52 gigawatt-hours, with Digiconomist noting around 0.85 watt-hours per transaction.

Driving Factors

The enormous energy consumption of Bitcoin and related cryptocurrencies stems from a mix of greed and the fear of missing out. These blockchain networks calibrate mining difficulty based on network power, implying lower power equals less energy per transaction.

Rewards drive participants with significant resources to flood the network with energy-hungry machinery, giving them a competitive advantage. As these rewards often surpass initial costs, environmental repercussions become secondary to financial profit. This dynamic attracts more participants, leading to increased energy usage.

Fast Fact

With a multitude of cryptocurrencies and exchanges worldwide, no current energy reports or calculations account for the energy required to develop new coins or manage their services.

As cryptocurrency prices and user adoption fluctuate, energy consumption from mining is likely to shift. Cryptocurrency mining remains competitive, with energy usage rising alongside increasing block reward values. Higher crypto prices attract more participants to mining networks, amplifying energy demands in pursuit of financial gains.

The energy intensity of crypto mining is intentional. The automated Bitcoin mining process validates transactions independently of conventional financial intermediaries such as banks.

Transaction validation relies on numerous computers’ computational capabilities, ensuring the security of blockchains using proof-of-work consensus.

Countries With the Largest Impact

Cambridge University researchers disclose that the majority of Bitcoin mining transpires in the U.S. (38%), China (21%), and Kazakhstan (12%). According to the Center for Strategic and International Studies, roughly 77% of China’s energy derives from coal and crude oil. In the U.S., two-thirds of electricity generation relies on fossil fuels, as reported by the EIA in 2022. Kazakhstan predominantly uses fossil fuels.

Consequently, three specialized ASIC miners, crafted for mining top cryptocurrencies, have contributed to an annualized figure of about 10.52 kilotons as of August 2024, per Digiconomist.

It’s crucial to highlight that not all cryptocurrencies operate on energy-intensive systems. Networks like Ethereum and Solana employ mechanisms demanding minimal energy, making their ecological footprint relatively insignificant compared to the impact from existing global network infrastructure and daily operations.

Accurate calculation of environmental effects is challenging. Predominantly, fossil fuels power countries where cryptocurrencies are mined, compelling miners to seek affordable energy sources to stay profitable.

According to Digiconomist, Bitcoin is responsible for approximately 55 million tons of CO2 annually, mirroring Singapore’s emissions. Ethereum, before its shift to proof of stake, generated an estimated 35.4 million tons.

Water Footprint

The heat produced by mining machines leads to the adoption of water cooling solutions by miners, manufacturers, and maintainers to minimize cooling costs. In certain instances, mining farms discharge warm water into bodies of water, potentially altering their temperature or contaminating them through continuous release.

Adequate research is lacking to determine the extent of water consumption or contamination resulting from these practices, leaving the implications uncertain.

Large-scale mining operations often situate in energy-rich regions, but cryptocurrency transactions and minting can occur without intensive energy expenditure. By utilizing non-competitive block proposing and verification mechanisms, Bitcoin could minimize energy requirements.

The proof of stake (PoS) consensus mechanism offers an energy-efficient alternative to traditional mining, granting transaction validation and network operation rights based on staked cryptocurrency. This mechanism ensures honest behavior through collateral, while providing fee-earning privileges.

Additional validation methods like proof of history, elapsed time, burn, and capacity are under development. While Ethereum’s shift to proof of stake led to a 99.9% carbon emission reduction, no similar move is planned for Bitcoin. As Bitcoin remains the dominant cryptocurrency, its energy-intensive mining will likely persist as long as it remains profitable.

Is Cryptocurrency Environmentally Friendly?

Cryptocurrencies necessitate considerable energy and unique equipment, producing significant waste, questioning their environmental friendliness. Yet, the energy demands of fiat currency production and conventional banking also pose ecological concerns.

Is Crypto ESG Friendly?

Though some cryptocurrency projects highlight adherence to environmental, social, and governance criteria, they’re less prevalent due to perceived lower profit potential compared to mainstream cryptocurrencies.

What Is the Environmental Impact of Crypto Assets?

Excessive energy consumption, unwarranted greenhouse gas emissions, and increased e-waste present major environmental concerns associated with certain blockchains.

Enormous energy usage and electronic waste from Bitcoin and similar networks challenge arguments supporting virtual currencies, perceived as valuable for providing financial services to underserved populations. Critics claim this energy use is squandered on valueless currency or enriches individuals who can afford pricey mining equipment, notably corporations and wealthy investors.

Regardless of fanfare or skepticism, cryptocurrency undeniably impacts the environment, predominantly relying on fossil-fuel-based energy. In an era urgently requiring carbon footprint reduction, additional monetization avenues at the planet’s expense are least desirable.

The views and assessments presented are solely for informative purposes. Consult our resources for further insights. The author holds no cryptocurrency assets as of this article’s publication.