First of all, here are some important basics to understand the why and how of the subject. A cryptocurrency is an alternative currency that does not have a physical form and is entirely virtual. It is exchanged directly from peer to peer without the intermediary of a bank or other controlling institution. Cryptocurrencies are digital, virtual, and dematerialized currencies using various technologies, the best-known and most widely used of which is blockchain. The management of this currency is decentralized and without a third party without a trusted third party, unlike the hierarchical and centralized systems of official currencies. There is therefore no legal framework or central bank that regulates cryptocurrency. But then who manages them? It is the users, who are called a peer network, who work to manage, validate, and verify transactions.
Major Cryptocurrencies
The first cryptocurrency to appear in the world? Bitcoin in 2009, and as of the time of writing, there are over 100,000 worth $2.39 Trillion (according to CoinMarketCap). Six major cryptocurrencies are often cited because they are the most popular in terms of market capitalization (total value of all units in circulation) and usage:
| Cryptocurrencies | Year of Creation | Description |
| Bitcoin(BTC) | 2009 | First cryptocurrency, the most popular for payment in particular |
| Ethereum(ETH) | 2015 | Programmable blockchain platform for developers |
| Binance Coin (BNB) | 2017 | Created by Binance, an exchange platform often used to pay transaction fees on the Binance platform. |
| Tether (USDT) | 2014 | The first and most important stablecoin |
| Cardano (ADA) | 2017 | Cardano is a proof of stake (POS) blockchain project that avoids the calculations associated with mining. |
| Dogecoin (DOGE) | 2013 | From blockchain technology, dogecoin is described as “promising”. |
The Blockchain
Blockchain is a code that is considered unbreakable and that allows currency accounting to be done. Each link in the chain depends on the code of the previous link to be issued. All links in the chain are therefore unique, preventing any attempt at falsification. It is this high level of security and its decentralized nature that make this new technology so strong.
Environmental Impact of Cryptocurrency
The crypto sector has seen a shift in public interest regarding the environmental cost and electricity used by the cryptocurrency network since 2018. Be careful, however, as not all cryptocurrencies pollute in the same way; the environmental impact differs depending on the type of cryptocurrency and the country in which electricity is used to run the data centers.
Mining: an energy-intensive practice
In the context of cryptocurrency, the main source of pollution is the energy consumption related to cryptocurrency mining. Indeed, mining requires powerful computers to solve complex mathematical problems and verify transactions on the blockchain.
Mining is creating and generating new cryptocurrencies (e.g. Bitcoins) in addition to those already in circulation. Mining is also coupled with a process called “proof of work” corresponding to miners who perform calculations for transactions in the blockchain. While in the early days of Bitcoin, a single computer was used to secure and create Bitcoins, today we talk about “mining farms”. Like data centers, these mining farms are in large warehouses with dozens or even hundreds of computers running non-stop to produce Bitcoin.
The hash rate is the mining speed corresponding to the mining power (and therefore the computing power) of a computer per second. According to the University of Cambridge, bitcoin has generated 60.78 Mt CO2e (made according to an “annualized measure corresponding to the total amount of GHG emitted over a year, assuming continued GHG emissions at the current rate”)
One thing to know is that the more popular the cryptocurrency is, the more transactions the computer has to verify, which leads to increased energy consumption. And the higher the economic value of the cryptocurrency, the higher its manufacturing cost. In short, when the demand for Bitcoin, for example, is high, its value increases, and the computer must therefore solve a complex problem; to overcome the competition, computers must be as efficient as possible which generates greenhouse gases. The electricity used for mining comes mostly from non-renewable energy sources. These energy sources are often coal or natural gas power plants. And these energy sources produce greenhouse gases. Bitcoin (and cryptocurrencies in general) therefore have an environmental impact.
Digital Pollution
Computers, the Internet, and new technologies generate pollutants that emit greenhouse gases. Digital pollution occurs at several levels:
- Amount of water consumed, cryptocurrency mining requires a large amount of water. This water is used to cool the computers used in the mining process. This can be a problem in regions and countries where water is scarce or expensive.
- The production of electronic waste linked to the lifespan of equipment and its replacement is quite high. Indeed, computers, to ensure their profitability, are replaced on average every 1.29 years according to a study published in 2021. This same study specifies that Bitcoin generates 272 kg of electronic waste per transaction processed in the blockchain. In addition, the need to have a powerful and latest-generation electronic chip requires rare earths, the extraction of which is polluting.
- Energy consumption, mainly from fossil fuels from mining, emits GHGs and contributes to global warming. A study specifies that the annual consumption of Bitcoin is 134 TWh in January 2022 and if Bitcoin were a country it would be ranked 31st out of 230 in the world (EIA data).
The vast network of hardware that powers the Bitcoin network requires a significant amount of energy, raising concerns about the cryptocurrency’s impact on the environment. But assessing Bitcoin’s true impact isn’t as simple as it seems. The Bitcoin network consumes an impressive amount of energy. The “mining” process requires significant processing power to solve complex mathematical problems, making it difficult to falsify records. In late November 2023, a study published estimated that it consumed around 2.2 trillion liters of water per year.
With the current surge in the price of bitcoin, the question is back in the spotlight. The exchange price reached a new record on the financial markets on March 8, briefly exceeding $73,900! However, assessing the true impact of Bitcoin is difficult due to the decentralized nature of the network and the uncertainty surrounding the hardware and energy sources used by miners. Translating Bitcoin mining data into carbon emissions is therefore complex. Studies typically rely on miners’ IP addresses to determine their location and the energy sources used.
Trillions of liters of water
In a paper by researchers at the United Nations University in Hamilton, about 67% of the energy used by Bitcoin between 2020 and 2021 would come from fossil fuels, mainly in China, Kazakhstan, and Russia. This would result in the emission of 85.89 megatons of CO2. Meanwhile, the Cambridge Bitcoin Electricity Consumption Index (CBECI) estimates Bitcoin’s annual CO2 emissions at 77.98 megatons. The CBECI calculations are based on location data from 2022, and an update is planned to reflect the departure of many miners from China and Kazakhstan.
On the other hand, the United Nations University’s estimate of the water footprint (1.65 trillion liters of water over the same period) differs significantly from the study cited above. A significant discrepancy confirms the difficulties in making accurate estimates.
But most estimates assume that electricity consumption increases proportionally to computing demand, when in reality the technology becomes more efficient at scale.
Regardless of the impact of Bitcoin, it is important to focus on solutions to reduce its impact on the environment. Several avenues can be explored. Governments could implement policies to regulate the environmental impact of Bitcoin mining. In the United States, the government has proposed taxing cryptocurrency miners to reduce the environmental impact.
Bitcoin and Tesla
Technological innovations could lead to more efficient mining processes. This could include the development of new hardware or software solutions that reduce the amount of energy required for mining. Miners tend to locate in areas where energy is cheap and often renewable, such as hydroelectric, solar, and wind. Some also use “non-renewable energy” such as waste methane from oil wells and landfills, which can be used as a carbon-neutral energy source.
Block (formerly Square), an American company, has opened a Bitcoin mine in Texas powered by solar energy and Tesla storage. For its part, HIVE Blockchain, a Canadian company, uses a hydroelectric plant to power its Ethereum mining facility in Sweden. Finally, CH4 Capital created by Daniel Batten (an investor specializing in climate technologies) is deploying mining solutions to reduce methane emissions by converting exhaust gases into electricity.
A recent report from the Bitcoin Mining Council revealed that in the first quarter of 2022, the Bitcoin mining industry as a whole used a sustainable electricity mix of 58.4%.
Bitcoin does indeed consume a lot of energy.
Bitcoin is an easy target for its detractors. Its energy consumption is easily calculable. Its environmental impact seems to be as well. At least on the surface.
As of March 2023, Bitcoin consumes about 129 terawatt-hours (TWh) per year or about 0.62% of global electricity consumption. It is now estimated that this Bitcoin network consumes more electricity than Sweden.
Yet the connection between the Bitcoin network, energy, the environment, and ecology is much more complex than it seems. It is not enough to calculate how many tons of CO2 are emitted by an industry to immediately condemn it.
Bitcoin has two main roles:
- be an independent, global, autonomous, and non-manipulated digital currency ;
- to be a decentralized payment network, without intermediaries, which cannot be censored.
This technology is based on a highly secure and efficient blockchain at a global level. Its level of security implies a high consumption of electricity, sometimes considered excessive, but necessary for its operation. The millions of daily transactions on crypto exchange platforms must be secured no matter what.
Mining pointed out as responsible
Miners are needed to ensure the functioning and security of a blockchain. Energy consumption is closely related to the hardware used by these miners. A blockchain like Bitcoin uses the Proof-of-Work model to secure its network. Miners must use their machines to solve cryptographic calculations and add new blocks of transactions to the network. Cryptocurrency mining is currently becoming increasingly energy-intensive. Since miners have a direct economic interest in optimizing their consumption, they must promote progress in energy efficiency. This involves using more robust, more efficient computer components and cheaper energy sources. This is why they seek, for example, to constantly use electricity that would have been wasted or lost.
Most of the mining power used (over 70%) is produced using renewable energy. Hydroelectricity is said to be the main source of energy for mining, and its carbon footprint is still overestimated. Geothermal energy is also an option. Miners are mobile: they can – and have every interest in doing so – move to where energy is cheapest.
In this quest for cheaper energy, these miners can also buy the surplus of unused energy at more attractive rates. In addition to improving their margin, they help to avoid the inevitable waste of electricity that could not have been stored.
Energy consumption should not be confused with carbon footprint. The means used to produce this energy are also decisive. Today, bitcoin miners are not the ones who run the most problematic coal-fired power plants. They are also not dependent on oil or gas. And above all, their consumption is adjustable without jeopardizing the Bitcoin network.
Bitcoin in Numbers
Key figures related to Bitcoin, according to a study conducted in 2021:
- Bitcoin’s electricity consumption has increased 16-fold compared to 2017;
- this consumption corresponds to that of 75% of French people;
- Worldwide, Bitcoin accounts for 0.56% of the world’s total energy consumption.
How to Reduce the Environmental Impact of Cryptocurrency?
The carbon footprint of Bitcoin would represent 0.55% of global electricity production in terms of energy consumption linked in particular to mining. The ecological impact would represent 168.9 tons of CO2. Bitcoin miners have been moving to countries where electricity is the cheapest. The goal of these miners is to save money and install their equipment there.
China, for example, was the main producer of Bitcoin for a long time until the summer of 2021. In November 2021, the country banned cryptocurrency mining as part of its carbon neutrality policy. Many miners subsequently emigrated to Kazakhstan. Other countries producing Bitcoin include Russia, the United States, Malaysia, and Iran.
Use of renewable energies
Among the solutions proposed to limit the environmental impact of cryptocurrencies, renewable energy can be a way to reduce greenhouse gas emissions in the context of cryptocurrency. Increasingly, Bitcoin in particular uses renewable energy. A report from the Bitcoin Mining Council indicates that the energy mix for Bitcoin is increasingly sustainable. It is, moreover, efficient in terms of technology. According to this study, bitcoin mining would thus be 59.5% from renewable energies. This would thus represent an increase of 6% compared to the previous year.
Technological alternative: consensus through proof of stake?
Proof of Stake (PoS) VS Proof of Work (PoW). These two algorithms enable consensus on the blockchain regarding the security and validation of blockchains.
Proof of work, which is the technology used by Bitcoin, is energy-intensive. Its transactions are slower than the proof of stake, used by Ethereum. Proof of work is also considered more secure.
A petition concerning the environmental impact of cryptocurrencies has been launched by Greenpeace “Change the Code: Not The Climate”. The objective is to “ push Bitcoin to change its software code to use much less energy”. The campaign, called Clean Up Bitcoin, takes the example of Ethereum. The latter is a virtual currency other than Bitcoin, which has changed its process validation code. This has reduced its electricity consumption by 99.95%. The protocol has thus moved from the very energy-intensive Proof of Work (PoW) to Proof of Stake (PoS).
Green cryptocurrencies?
There are cryptocurrencies for everything! Here is a quick overview of cryptocurrencies whose existence goes hand in hand with ecological or ethical considerations, including:
- IMPT.io (IMPT) allows you to support environmental and ecological projects through carbon credits. This way, you can finance wind farms, forest preservation projects, or even energy production plants.
- C+Charge (CCHG) which rewards electric vehicle owners with carbon credits. The payment system is based on Peer-to-Peer (P2P) charging stations, using blockchain technology. The pre-sale started in December 2022.
- Solar Coin: An American initiative that aims to promote the production of solar energy and obtain means to finance energy transition projects. For each MWh produced, producers and individuals alike will receive a SolarCoin on their virtual wallet. SolarCoin (SLR) has been around for almost ten years and its goal is to incentivize the production of solar energy. The use of Proof of Stake and solar energy allows the creation of the cryptocurrency.
- The Ecocoin: This currency rewards the user for good actions carried out in terms of sustainable development. Each time your actions are favorable for the environment, you can claim to obtain Ecocoins, if your action can be proven by one of the currency’s partners (doing shopping in an organic store will prove that your consumption habits are responsible, with the Ecocoin).
- PlasticBank: Reducing plastic pollution in the oceans by putting a price on plastic waste is the mission assigned to PlasticBank. The currency has a higher recovery rate for plastic waste than the market, thus promoting collection for recycling and encouraging local authorities to better take sorting into account in their policies. It also finances recycling plants in countries that do not have the means to build them.
- Peercoin: Blockchain technology is essential to issue a cryptocurrency. However, it requires a lot of energy because it requires a computer to perform many calculations. Peercoin uses “proof of stake” which avoids the centralization of calculations on a single computer and distributes them among all users of the currency. This technique aims to reduce the energy impact that the currency needs for its operation. In exchange, users earn 1% interest to thank them for contributing to the growth of Peercoin.
- Fair Coin: FairCoin brings together all the notions of sustainable development around a single currency. Indeed, the FairCoop company wants a better distribution of wealth and improve social bonding factors thanks to FairCoin, while limiting the energy impact generated by the creation of this currency.
- Plastiks (PLASTIK) helps reduce plastic waste by connecting businesses with waste recovery projects.
Which blockchains consume the least energy?
First important point: not all blockchains (and their algorithms) work the same way as Bitcoin. On the other hand, not all other blockchains are as open, public, and as decentralized as Bitcoin or Ethereum. They cannot perform the same functions. We detail some examples in this section.
The Binance Smart Chain for example is very economical. Its energy consumption per transaction is negligible. However, its network is weakly decentralized since it is only composed of 21 validator nodes. It is said to operate on a Proof-of-Stake Authority (PoSA) consensus protocol. This gives the power to validate transactions to a limited number of validators.
Solana (SOL) is another blockchain that has been much talked about since its price exploded. This open-source project aims to make the creation of decentralized applications accessible to as many people as possible. Its consensus protocol is called “Proof-of-History” . It allows, while maintaining decentralization, to accelerate the transaction speed while optimizing the energy consumption of the network.
Finally, Tezos (XTZ) is known as one of the most eco-friendly blockchain networks. Its Proof-of-Stake protocol replaces computing power with asset sequestration to participate in block validation.
Why Cryptocurrency Is Not an Ecological Anomaly
Crypto miners and Immediate Edge clients stand to gain from accelerating progress in energy efficiency. Given the amount of money invested in developing blockchain technologies, they could be a real asset for innovation.
Since renewable energy production is even less profitable than coal (because it is difficult to store and transform), the cryptocurrency could even become an asset for ecology. Mining can help make a green energy project profitable. By setting up near a dam project, on volcanic soil or near a wind farm.
Most reports using arguments discrediting Bitcoin and its ecological impact take a lot of shortcuts. Of course, Bitcoin consumes energy. Just like a lot of sectors of activity: the banking system, gold mining, data storage, etc. But we must not forget that we are only at the beginning of innovations in this sector which is set to improve every day, where others have reached their limits. Many initiatives also have the project of making cryptocurrencies as eco-responsible as possible.
The real question to ask is: does the utility of blockchain and cryptocurrencies justify this use of energy? Everyone is free to form their own opinion. To answer this question, it is necessary to understand the advantages and disadvantages of these new exchange networks and their decentralized currencies.
The essentials to remember about the ecological impact of cryptocurrencies
Until the fundamental utility of cryptocurrencies is recognized and accepted by the majority of us, it will be difficult to change things. The public opinion – still poorly informed on this subject – is still quite negative about the energy consumption used to develop blockchain projects and use bitcoins.
The ecological cost of cryptos is an undeniable reality. It would now be a question of comparing it to their usefulness, to establish an objective assessment of the advantages and disadvantages. In the meantime, highly skilled communities of entrepreneurs and technicians continue to innovate and come up with solutions. Whether they are simply more efficient, or completely revolutionary.
