How Cryptocurrency Hurts the Environment IRL

You may have heard that some cryptocurrencies are bad for the environment, and now you’re thinking: Wait. Cryptocurrency is an entirely digital currency. So if it doesn’t exist in the physical world… how could it be affecting the physical world?

It is a concept that can make your head spin. But, it’s true.

Even though the currency isn’t physical, it is created by physical systems, and that’s where the environmental impact comes in. Let’s double click on Bitcoin, because it’s one of the least efficient cryptocurrencies to manufacture.

Bitcoin is created in a process called Bitcoin mining. But I promise you, Bitcoin mining is not what you think of when you picture traditional mining. When you think of mining you probably think of, well, a mine-- with hardhats and caves and canaries. But, Bitcoin mining doesn’t happen in a mine, it happens on a computer. This is the interesting part about Bitcoin. Anyone can mine Bitcoin; and you can do it anywhere in the world, so long as you have access to a computer.

Can you imagine if anyone could print dollar bills? Not only that, but imagine that you could print dollar bills at home, without even getting out of your PJs. If this was a thing, I would do it, wouldn’t you? So why isn’t everyone making Bitcoin?

Here’s the catch. While you can mine Bitcoin through a computer, it’s a pretty complicated process. In order to create one Bitcoin, you need to program your computer to solve billions of calculations per second.

As you can imagine, that takes a lot of energy. To put it into perspective, it’s estimated that the average American household uses about 30 kilowatt hours of energy every day. How much energy does it take to mine one Bitcoin? Around 1,544 kilowatt hours of energy. That’s equivalent to the amount of energy you use in 53 days at home. Bitcoin mining is now an industry that’s using the same amount of energy as entire countries. According to CNBC, Bitcoin has a carbon footprint comparable to that of New Zealand.

So all of this sounds like bad news for Mother Earth, right? And there’s only one planet and plenty of cryptocurrencies, so we have to put the planet first. Let’s take a look at some solutions.

First, not all cryptocurrencies rely on this math-y intensive mining process, and therefore, not all cryptocurrencies require as much energy to produce as Bitcoin. On the other side of the coin (so to speak), there are actually some cryptocurrencies that reward environmentally friendly investments, like SolarCoin.

But if Bitcoin is here to stay, then we should focus on making mining more efficient. One way to do this would be to use renewable energy for production instead of fossil fuels. Some countries have gotten a head start on this. In Iceland, for example, cryptocurrency miners are using renewable energy to power their computers. Plus, in countries with cooler climes like Iceland, computer servers can be cooled down naturally.

But my personal favorite? There are some people that argue that cryptocurrency mining could be a great way to harness natural sources of energy that are currently untapped. Like... and I’m being serious here… volcanos. In El Salvador, the government is encouraging companies to find a way to use geothermal energy from the country’s volcanoes for crypto mining.

So when you start hearing about Volcano-coin (Volcoin-o?), say you heard about it on The Money Minute before it was cool. In the meantime, some companies are stepping up and pausing partnerships with cryptocurrencies to put pressure on finding energy-efficient ways of mining. Famously, Elon Musk, who had allowed customers to buy Teslas with Bitcoin, paused that payment program, out of concern for the environment.

The Guardian has some great reporting on this topic, and they throw a little shade at us, the folks at home, by noting that the energy wasted by plugged-in but inactive home devices in the US alone could power bitcoin mining for 1.8 years. So, we can’t put this environmental mess all on Bitcoin miners and Elon Musk, we’re all going to have to do a little bit more for Mother Earth than just… not mine bitcoin.

So if you’re interested in crypto, you should do the planet a favor and make your own personal carbon offset. I’m not saying that if you buy a Bitcoin you should shut off your power for 53 days... but yeah, maybe take a shorter shower, quit plastic bags, or use some of the dividends in your crypto investments to donate to an environmentally-friendly cause. And, read my article on ways to help the environment and your wallet. Duh.

xo,