The upsurge in the amount of cryptocurrency and its mining is massively polluting the earth’s natural elements. What’s worse is that it’s jeopardizing every country’s effort to cut carbon emissions. Decentralized virtual currencies like Bitcoin are typically favored as a payment method for anonymous international transfers of funds. Due to its great demand and liquidity, cryptocurrency is also a popular investment option.
The mining process of cryptocurrency, proof-of-work, uses supercomputers to solve arbitrary and highly complicated mathematical problems to create additional coins. But is this all it takes to create significant environmental damage? If this damage continues, will we be able to make crypto forecasts like Chainlink price predictions, or will they be affected by carbon emission policies?
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Let’s begin by understanding just how harmful crypto mining is to the environment.
How Does Cryptocurrency Affect the Environment?
To comprehend the environmental impact of cryptocurrencies, we must first understand how new coins are generated. The blockchain relies on people to confirm transactions and add fresh blocks of information because a central body does not regulate cryptocurrencies. To defend against bad actors seeking to exploit this new information, these blockchains need to be incredibly complex and costly to validate. As a result, the majority of cryptocurrencies now utilize proof of work.
Cryptocurrency transactions can be verified through the use of a consensus process known as proof of work. A predetermined sum of cryptocurrency is awarded to the first individual who solves the challenge. After that, the process repeats itself. It’s the most commonly employed method of reaching a consensus.
When you “mine” cryptocurrencies, you are running programs on your computer that are trying to solve the problem. When it comes to obtaining the right to upgrade and reap the rewards, the more powerful your machine is, the better your chances of beating your competitors.
An ASIC (Application-specific integrated circuit) miner, a machine specifically intended to mine a specific cryptocurrency algorithm, was created to further optimize computational resources toward addressing these proof-of-work difficulties. Although ASIC miners may be used to mine any cryptocurrency, they have become necessary for Bitcoin mining because of the fierce competition.
As the number of people mining Bitcoin increases, so does the level of competition. The difficulty of mining crypto rises in direct proportion to the amount of equipment available. In other words, there’s a race going on currently between ever-increasing numbers of mining machines.
According to the University of Cambridge, Bitcoin alone uses 132.48 terawatt-hours (TWh) yearly, which is more than Norway’s annual energy consumption of 123 TWh in 2020. According to how that energy was generated, there will be a different amount of carbon dioxide released. However, in 2020, the United States, where 35.4 percent of Bitcoin mining takes place, will produce .85 pounds of CO2 per kWh. Bitcoin mining in the United States generates roughly 40 billion tons of carbon dioxide each year.
An additional Bitcoin distribution rule is for it to be cut in half every four years or so to maintain the blockchain. In 2020, the payout was reduced from 12.5 coins to 6.25 coins. The amount of carbon dioxide emitted to make one coin doubles with each halving.
Social Impact of Mining
While cryptocurrencies have contributed to environmental degradation and an increase in global warming to the catastrophic 1.5-degree point, they have also had social consequences. There have been reports of crypto mining putting vulnerable electrical systems at risk in nations with weak infrastructure. Due to Bitcoin mining blackouts, thousands of people have been left without heat or energy for days in various Iranian, Kazakh, Chinese, and Kosovan cities.
Can Crypto Mining Be Regulated?
Several governments have already banned cryptocurrencies in reaction to the threats to energy supplies, frequent blackouts, and environmental damage caused. Several countries, including China, Iran, Qatar, Morocco, Algeria, and Egypt, have declared cryptocurrencies and cryptocurrency mining activities illegal. There may be more than one motivation for these countries’ actions. In countries with tight controls like China and Iran, they may be less motivated by a concern for the environment.
In light of Europe’s growing energy crisis and desire to move toward renewable energies, the European Securities and Markets Authority (ESMA) recently urged broader regulation against PoW mining. If COP26’s climate goals are met in 2022, crypto mining regulation will be a major issue of conversation.
Many people wonder whether crypto mining is a negative use of energy, even though there are a variety of solutions to the problem. One common view is that energy use is not always a bad thing. Email and other digital applications, on the other hand, are rarely viewed as bad even though they utilize energy.
It is imperative that we discover ways to encourage the use of renewable and sustainable energy across all industries, given the foreseeable rise in demand for more advanced and powerful computing power in the forthcoming decades.