Mining crypto-assets requires high-powered computers to solve math problems that create new coins. This process requires massive amounts of energy, which emits carbon dioxide into the atmosphere.
Cryptocurrency mining is a major driver of climate change. It threatens to undermine decades of progress toward achieving climate goals. It also poses serious threats to energy systems, utilities, communities, and ratepayers.
How Much Energy Do Crypto Miners Use?
Cryptocurrency mining is one of the most popular ways to make money using digital technology, but it’s also putting a strain on power grids worldwide. The hefty electricity costs of Bitcoin “mining” aren’t just an issue for those in the industry; they’re a growing concern for energy regulators and utilities.
Unlike video gaming and gold mining, which consume vast amounts of energy but don’t involve specialized computers, Bitcoin miners rely on high-powered computers and the mining software that runs them to validate blocks of transactions in the blockchain network. These “miners” race to solve complex puzzles and earn new coins in exchange for their efforts. The process requires a lot of energy, and this has led to some countries banning cryptocurrency mining altogether.
In the United States, Bitcoin mining has grown rapidly over the past year. Some states have started enacting regulations designed to protect local communities from the impact of these booming operations, including restrictions on where and how they can operate. Others, like Texas, have welcomed the crypto mining industry and facilitated its growth by creating incentives for miners to build facilities there.
But these policies have created an uneven playing field. Those with cheaper power have a competitive advantage over those who don’t, and the resulting stress on grids can lead to blackouts. And the influx of crypto-mining operations is imposing a serious strain on the already-stressed Texas power grid.
For example, in February 2021, the state’s power grid suffered a severe power outage that left four million people without electricity. It was the first major blackout in Texas since 2009.
Similarly, in Kazakhstan, crypto mining companies are consuming so much energy that they’re draining the country’s hydropower supply to meet their demands. And in the United States, some local governments are enacting zoning ordinances that require crypto miner facilities to generate their own power from renewable sources, rather than importing it from abroad.
These regulations are important because they help ensure that cryptocurrency mining is an activity that doesn’t harm the environment or other consumers. They are also crucial for encouraging more energy-efficient methods of mining. For example, there’s a new approach called the “RE Emissions Score” that helps quantify the carbon emissions of crypto mining by tracking the energy used to run the underlying equipment.
Where Are They Mining?
The location of cryptocurrency mining facilities largely determines their carbon footprint. The ideal mining locations have cheap energy, low environmental impact, and a good supply of minerals to mine, such as copper or gold.
Cryptocurrency mining has become an increasingly popular activity in the United States, with many towns eager to stand up facilities for miners and craft crypto-friendly regulations. However, many states are still struggling to regulate the industry, causing bureaucratic hangups and environmental concerns to slow the movement.
For example, in Kearney, Nebraska, a field full of modified 40-foot shipping containers is one of the largest facilities for bitcoin mining in the country. The facility, run by a company called Compute North, uses specialized computers that consume 150 megawatts of electricity when fully operational.
This facility has helped make the town of Kearney, a rural community east of Omaha, an attractive place for cryptocurrency mining. The area has plenty of land and previously abandoned industrial infrastructure that can be repurposed for the mining industry.
Moreover, the United States has a strong history of mining, including coal and other minerals. In fact, it was once the world’s third-largest producer of hydroelectric power and is now a leader in nuclear energy production.
According to data from the largest mining pool in North America, Foundry USA, 19.9% of all Bitcoin’s hashing power resides in New York, Kentucky, Georgia, and Texas. These are the states that produce the most renewable energy, making them an ideal spot for Bitcoin miners.
The mining industry is also a significant economic driver in many states, especially those that are awash in mineral resources. For instance, Nevada, which has the largest concentration of coal in the United States, has several thriving mining industries, as well as a large and active mining workforce.
Some of these mining operations use renewable energy, such as wind and solar. Others use geothermal energy, which is a powerful form of renewable energy that harnesses heat from the Earth to generate electricity.
For this reason, a significant percentage of the world’s most profitable Bitcoin mining operations are located in nations with abundant geothermal resources. Some of these projects are even being used to power cities and other infrastructure.
What Can We Do About It?
Cryptocurrency mining is an energy-intensive process that uses computers to validate transactions and secure the blockchain. To mine new coins, miners compete to solve increasingly complex mathematical problems using specialized equipment. This is called “proof of work” (PoW) mining and the growing use of PoW mining has led to a surge in carbon emissions associated with cryptocurrencies.
Moreover, the electricity that miners use to power their mining operations also impacts the local water supply. The withdrawal of water from rivers and lakes to cool down power plants harms fish and aquatic life, which can lead to algal blooms that degrade the quality of local water supplies.
If miners could shift to alternative methods, such as proof of stake (PoS), which requires fewer computing resources than the “proof of work” model, they could cut their carbon footprint. But they would need to invest in a lot of new hardware and it could take several years before the switch is fully rolled out.
To address the climate impacts of crypto mining, governments should consider imposing regulations that restrict energy-intensive mining. These could include requiring that all miners be located in locations with access to renewables, or limiting the amount of purchased grid electricity they consume.
Other options for regulating crypto mining could be to set standards for power efficiency and greenhouse gas emissions or to provide incentives for switching to alternative energy sources. These could be achieved through policies that provide financial and other incentives to miners, such as those that have been put into place for electric vehicles.
A combination of these measures would lower the overall carbon intensity of mining, and would likely be necessary to mitigate the climate impacts of crypto assets as they continue to grow. However, such efforts may be difficult to implement because crypto mining is a relatively new technology that relies on complex computer hardware.
In the meantime, the Trump administration should encourage the development of crypto-asset technologies that are less energy-intensive than current systems and that use clean electricity when possible. Such a strategy would help to meet our National Determined Contribution under the Paris Agreement and reduce the likelihood of severe consequences from global warming.
How Can We Reduce Their Carbon Footprint?
Cryptocurrency mining is an energy-intensive process that creates planet-warming emissions. This is mainly done by burning coal, natural gas, and other fossil fuels to produce electricity that drives the blockchain computers used for mining.
This electricity generation generates carbon pollution and strains the local power grids. In addition, it raises retail electricity rates and increases local air pollution.
As such, it can undermine efforts to achieve the United States’ climate goals and commitments. A recent report released by the White House Office of Science and Technology Policy warned that crypto mining can hinder broader efforts to mitigate climate change.
Mining cryptocurrencies like Bitcoin, Ethereum, and Litecoin is an energy-intensive process that requires running banks of computers to solve complex math puzzles in order to validate transactions and produce new coins. Some of these coins, including Bitcoin, are stuck with this “proof-of-work” system, while others are moving to different methods that require less energy.
These different mechanisms for the verification and production of cryptos could help to reduce their carbon footprints. For example, Ether, the second largest cryptocurrency by market value, this year moved to a “proof-of-stake” mechanism that should significantly reduce its energy use.
But while the promise of reducing their impact is encouraging, these technologies are still controversial and not authorized by many governments. As such, it is unlikely that they will ever be widely adopted.
To reduce their carbon footprints, we need to encourage crypto miners to increase their use of renewable sources of energy and adopt more sustainable practices. This is a critical step toward achieving a sustainable future, but it will take a long time and a lot of work.
One promising way to reduce the carbon footprint of cryptocurrency mining is to encourage the mining industry to source more of its electricity from renewable sources like wind and solar. This would have a dramatic impact on global warming and local air pollution.
Moreover, we need to ensure that these efforts do not undermine the objectives of public authorities or investors. In addition, financial institutions should incorporate material climate-related risks in their risk management frameworks and ensure that the crypto assets they manage align with ESG goals and requirements.
[su_button id=”download” background=”#16181b” size=”6″ center=”yes” radius=”20″]Coupon Code: @EJQViMaGPs[/su_button]