Can cryptocurrencies go green to mitigate climate change?

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Cryptography has made and will continue to make a decentralization of the internet possible, as well as changing the economics of banking, finance , gaming , shopping , entertainment , and even human interaction.

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The promise of this technology extends to the monetary part, in which cryptocurrencies already reach values of up to 2 trillion dollars. So can such a growing industry ignore the problem of global warming and the resulting climate change ?

The great challenge of this industry lies in the creation of cryptocurrencies : the supercomputers that generate coins through cryptography require a lot of energy. According to data from an expert panel organized by DealBook, the process of creating Bitcoin (one of the most famous cryptocurrencies), to spend or trade consumes about 91 terawatt hours of electricity per year, more than the energy it consumes. Finland , a nation of approximately 5.5 million people.

Within the same panel of experts it was stated that a large part of the environmental impact of cryptocurrencies comes from the energy used by computers to generate new digital tokens , through a process called ” proof of work “, which is one of the main mechanisms consensus that cryptocurrencies use to verify new transactions , add them to the blockchain and create new tokens.

Cryptocurrency generation process.

It all starts with the creation of new blocks for the cryptocurrency blockchain. Those transactions will return rewards, paid in cryptocurrencies. The power consumption is in the part where you try to fill these blocks for the blockchain . Around three million machines around the world participate in a massive game of “guess the number”, generating 140 trillion guesses per second of the day, non-stop. Then they can create the next part for the blockchain, but that’s the power-consuming part. And not all cryptocurrencies need it.

Given the challenges imposed by each part of the process in the generation of cryptocurrencies , what actions could help reduce the impact they have on the environment ?

Cryptocurrencies as a battery.

Cryptocurrencies could function as another type of “battery”. They could store the value of renewable energy by converting intermittently available local solar and wind power into a globally traded digital asset with an unlimited lifespan.

One way cryptocurrency mining can be made more sustainable is to use “stranded” or wasted energy, for example, by capturing the power of flue gas in patches of oil to generate digital money.

Reduce the environmental costs of mining hardware.

Within the environmental costs of cryptocurrencies , mining hardware is not usually considered, which quickly becomes obsolete and generates toxic electronic waste.

Although it is about updating this equipment as fast as possible so that its carbon emissions are lower, the point is that the overproduction of hardware requires more and more resources that for its elaboration use large amounts of minerals, which requires a overexploitation of the soils, contamination by extraction of these minerals and contamination by the waste generated by these machines.

To regulate the environmental cost of generating cryptocurrencies , two options are proposed: greater transparency about carbon costs when running a cryptocurrency business, and the implementation of some type of carbon tax .

Environmental justice organizations such as the Sierra Club, the Institute for Open Markets, and the Center for Action on Race and the Economy, urged the inclusion of the energy use of cryptocurrencies in the new rules for the sector.