Some want to decarbonize cryptocurrency. Others fear renewables may not be enough to turn cryptocurrency green. So they're doing something about it.
The signatories of the Crypto Climate Accord have agreed to power their mining operations with 100% renewable energy by 2025, achieve net-zero emissions from energy consumption by 2030, and decarbonize the whole industry by 2040. This article will examine the hurdles that threaten to derail the accord's plans and whether decarbonization is enough to make cryptocurrencies truly green.
The Benefits of Switching Mining To Renewable Energy
Part of the plan to make cryptocurrencies, particularly Bitcoin, more sustainable is to transition to renewable energy sources. Proponents of the idea suggest that Bitcoin mining could help the renewable energy industry solve some of its nagging problems.
Since renewable energy often goes to waste shortly after production, Bitcoin mining rigs could act as grid stabilizers. They would do this by raising or lowering their power draw based on how much surplus exists. During periods of low need, the mining units would use energy to produce Bitcoin.
Some have pointed out that, in the absence of reliable long-term renewable energy storage, Bitcoin miners could act like a "value battery." Although they would consume the power, they would convert it into value (i.e., Bitcoin) for the renewable facility operators. Then, instead of dissipating, blowing away, or flowing downriver, this value would enter the economy.
Consuming Huge Amounts of Renewable Energy Has Consequences
Switching to renewable energy would undoubtedly lower the carbon emissions of cryptocurrency mining. However, there are several drawbacks to the plan. Most importantly, the mining process will still require astronomical power. Unless the energy is strictly surplus or orphaned, it might be used elsewhere in the economy to provide power to or create jobs for people in need. There is an equity concern.
In addition, if cryptocurrency mining uses all the surplus energy, there will be no opportunity to export it to nearby countries that have less access to renewables. So the mining would produce no carbon, but nobody would be able to use the energy to make the entire grid greener.
Finally, the analogy of a grid-stabilizing "value battery" has limited utility. While the mining might be practical during low demand, Bitcoin miners are only effective when they constantly operate at max capacity. Furthermore, the value in the mined Bitcoin is not a "battery." It cannot turn back into green energy to power the grid. The whole plan is better considered a band-aid until long-term energy storage technology catches up.
In addition to these issues, cryptocurrency mining also produces enormous amounts of toxic e-waste due to wear and tear on the components. Without proper cooling, which requires further energy consumption, mining rigs overheat and need to be replaced. Moreover, as a cryptocurrency's blockchain grows, its complexity increases, requiring more powerful hardware upgrades.
Bitcoin and most other cryptocurrencies require vast computing power to add new data to their transaction records.
Most Miners Will Not Move Away From Fossil Fuels
Recent history suggests that most crypto miners view fossil fuels as a more reliable energy source. China was a hotbed of cryptocurrency miners until 2021. Many mining facilities used inexpensive hydroelectric power, but their consumption was so high there were blackouts in some Chinese cities. Furthermore, the power draw increased the demand for new coal plants. Therefore, the Chinese government soon banned cryptocurrency mining before it could derail their green initiative.
The Chinese Bitcoin miners moved to the U.S. and Kazakhstan, two countries with abundant fossil fuel power. At this point, more than half of the world's crypto miners operate in these countries, drawing most of their energy from non-renewable sources.
Although many people have suggested that education and regulation could help, giving carbon credits to miners who use green energy would not solve the material waste, energy equity, or sustainability issues raised above.
New Cryptocurrency Tech Solves The Problem
A better way to help cryptocurrency go green would be to lower its energy requirements. Bitcoin and most other cryptocurrencies require vast computing power to add new data to their transaction records. They use a proof-of-work (PoW) system that requires members of the network to compete to solve complex math problems quickly. The solution validates the new data, and the winner receives some currency as a reward – this is the mining process.
Bitcoin's largest competitor, Ethereum, will switch to a proof-of-stake (PoS) mechanism within the following year. In a PoS system, network members buy into a lottery by staking their own currency, tying it up in an inaccessible virtual vault on the network.
The winner can validate new data for a reward, just like in a PoW system, but there's no advanced math competition. The PoS system requires less than 1% of the power used by Bitcoin and others like it. Furthermore, there is no more e-waste than ordinary, everyday computer use.
Vote With Your Wallet To Encourage Change
Encouraging cryptocurrencies to adopt a PoS consensus mechanism may be the best way to address sustainability. Reducing the energy requirements to mine crypto helps solve problems specific to the industry, namely, rampant energy consumption and massive e-waste. Furthermore, reducing consumption avoids some of the unintended consequences associated with switching to renewable energy.
For example, the energy will be there to serve more equitable societal outcomes. It can also help move areas with less access to green energy to a more sustainable grid. Ultimately, Bitcoin may not go green. But its main competitor, Ethereum, is about to, and an army of eco-friendly cryptos could rise to replace the world's first and biggest cryptocurrency.
If you want to explore green crypto, invest in cryptocurrencies that already use PoS consensus mechanisms. Some have already announced that they are carbon neutral.
If your business' computing energy already comes from renewable sources, great! Use just a tiny bit of that energy to mine a PoS cryptocurrency with your hardware.
At this point, it seems Bitcoin will not or cannot change. It's a distributed system, which means no one is in charge. If you want to use a prominent cryptocurrency, avoid Bitcoin in favor of Ethereum, which is on the verge of switching to PoS.