The price of cryptocurrencies has shot up in the last ten years, leading to huge investments in the cryptocurrency industry. Digital currencies now have the trust of top investors worldwide, including big companies, tech tycoons, and even some people with shady intentions, like criminals and those looking to launder money or evade sanctions.
Thanks to innovations like blockchain, digital currencies have become a significant part of the modern financial system. Some even believe they could eventually challenge traditional, strong currencies.
Enter the gold rush
The cryptocurrency market boom is a bit like the historic gold rush. But there’s a darker side to this exciting market. Research by United Nations scientists shows that mining cryptocurrencies can have a big impact on the environment, affecting things like the climate, water, and land.
Among all cryptocurrencies, Bitcoin is the most famous and widely used. This made the UN scientists take a closer look at how Bitcoin mining affects the environment in 76 countries during 2020-2021. The results are quite shocking. Not only does Bitcoin mining leave a significant carbon footprint, but it also puts a lot of pressure on global water and land resources.
“Technological innovations are often associated with unintended consequences and Bitcoin is no exception,” the researchers explain. “Our findings should not discourage the use of digital currencies. Instead, they should encourage us to invest in regulatory interventions and technological advancements that improve the efficiency of the global financial system without harming the environment.”
Environmental impact
According to a study published by the United Nations University and the Earth’s Future journal, in the period from 2020 to 2021, the global Bitcoin mining network used up a massive 173.42 Terawatt hours of electricity. To put this in perspective, if Bitcoin were a country, its energy consumption would have ranked 27th in the world, ahead of a country like Pakistan, which has a population of over 230 million people.
This energy consumption resulted in a carbon footprint equivalent to burning 84 billion pounds of coal or running 190 natural gas-fired power plants. To offset this footprint, we would need to plant 3.9 billion trees, covering an area nearly the size of the Netherlands, Switzerland, or Denmark, or about 7% of the Amazon rainforest.
During this period, the amount of water used for Bitcoin mining was roughly equivalent to what it takes to fill over 660,000 Olympic-sized swimming pools, enough to satisfy the current domestic water needs of more than 300 million people in rural sub-Saharan Africa. The land used for Bitcoin mining worldwide during this time was 1.4 times the area of Los Angeles.
Dirty fuel
The research shows that Bitcoin mining heavily depends on fossil fuels, with coal making up 45% of Bitcoin’s energy sources, followed by natural gas at 21%. While hydropower, a renewable energy source with its own environmental challenges, contributes 16% of the electricity needed for Bitcoin mining. Nuclear energy makes up 9% of Bitcoin’s energy mix, while solar and wind, which are cleaner, only account for 2% and 5% of the total electricity used by Bitcoin.
China leads by a significant margin as the largest Bitcoin mining nation. To compensate for the carbon emissions from China’s coal-intensive Bitcoin mining operations in 2021-2022, about 2 billion trees would need to be planted, covering an area equivalent to the combined size of Portugal and Ireland or 45,000 times the area of Central Park in New York City. Besides China, the top 10 Bitcoin mining countries in 2020-2021 included the United States, Kazakhstan, Russia, Malaysia, Canada, Germany, Iran, Ireland, and Singapore.
“Because countries use different sources of energy to generate electricity, their electricity production impacts on climate, water, and land are not the same,” the researchers explain. “The rankings of countries in terms of the environmental impacts of their Bitcoin operations change depending on which environmental footprint is considered.”
Top of the table
Countries like Norway, Sweden, Thailand, and the United Kingdom find themselves in the top 10 when considering the environmental impact of their Bitcoin mining activities on water and land. Collectively, these top 10 countries account for a significant 92-94% of Bitcoin’s global environmental footprint, encompassing carbon emissions, water usage, and land occupation.
The United Nations scientists put forth a range of recommendations aimed at encouraging governments to oversee and alleviate the environmental effects of cryptocurrencies. They also propose exploring investments in alternative digital currencies that are more energy-efficient and less harmful to the environment. Additionally, the study emphasizes the importance of addressing the cross-border and long-term consequences associated with cryptocurrency mining.
“When you note which groups are currently benefiting from mining Bitcoin and which nations and generations will suffer the most from its environmental consequences, you can’t stop thinking about the inequity and injustice implications of the unregulated digital currency sector,” the researchers conclude.
