In the modern age of technology, investors turned to cryptocurrency as the money of the future. However, though many believe that such currency is vital to building a sustainable future, experts are concerned about its impact on the environment and the global economy. The controversy around all kinds of cryptocurrency is now challenging financial trends while setting the course for a new financial era.
A tremendous waste of energy
Experts’ main concerns revolve around the amount of energy needed to procure a single cryptocurrency. Take Bitcoin for an example, this cryptocurrency is the first decentralized digital currency that can be exchanged directly without needing any bank transaction. It is also the reason behind the rising controversy. The Bitcoin network isn’t only worth trillions, but it also needs a staggering amount of energy.
Tim Berners-Lee, credited as the inventor of the World Wide Web, even described “Bitcoin mining” as “one of the most fundamentally pointless ways of using energy.” Bitcoin mining is the process of creating this currency. Since it doesn’t exist as physical objects, new coins are brought into circulation via using powerful computers to solve complex mathematical problems. However, in order to take place, the process needs a huge amount of energy. According to Digiconomist, which created what it calls a Bitcoin Energy Consumption Index, only one Bitcoin transaction is “equivalent to the carbon footprint of 735,121 Visa transactions or 55,280 hours of watching YouTube.” Thus, experts estimate that the bitcoin network is consuming more energy than several countries, including the Netherlands and Kazakhstan.
Furthermore, if we compare the Bitcoin network to a country, its annualized estimated carbon footprint would be equal to that of New Zealand, almost reaching 37 million tons of carbon dioxide. Even without producing any plastics or wastes, crypto mining is harming the environment on a staggering scale.
“As the resource intensity of running Bitcoin has increased over recent years, it has become a serious concern for its potential impact on health and climate,” Alex de Vries, a data scientist who put the index together, wrote in the journal Energy Research & Social Science.
A driver of sustainable development
Despite such findings, many still believe in the role of cryptocurrencies in empowering sustainable developments. The UN even argues that cryptocurrencies, along with their technology, can improve our stewardship of the environment. Unlike banks and other money transaction methods, crypto can provide a crystal-clear amount of transparency. This kind of currency relies on technology that is resistant to tampering and fraud. Therefore, in regions with weak institutions and high levels of corruption, crypto technology can provide a trusted record of transactions.
For example, the UN’s “The World Food Programme” reports that the blockchain is helping ensure the delivery of the money to those who need it most. This proved fruitful in Pakistan since beneficiaries are securely and quickly receiving the needed funding without the need of local banks.
Some experts can argue that cryptocurrency is blocking environmental degradation instead of enabling it. For example, the World Wide Fund for Nature (WWF) is using it to eliminate illegal fishing in the tuna industry. This CarbonX platform is turning reductions in greenhouse gas emissions into a cryptocurrency. Thus, it is providing manufacturers and consumers with a financial incentive to facilitate more sustainable choices.
Moreover, since information regarding greenhouse gas emissions is very lacking in many countries, Blockchain can monitor their progress in reducing their carbon footprint. Additionally, crypto can not only boast all kinds of investments contributing to slowing climate change, but it can also increase the take-up of renewable energy sources. Thus, blockchain has the ability to create energy markets for wind and solar energy sources, thus reducing the global dependence on fossil fuels.
Perhaps the biggest challenge standing in the way of cryptocurrency is finding low-energy solutions to fuel its process. However, many potent figures in this industry are looking for alternatives. The Ethereum Foundation, the organization behind the Ethereum cryptocurrency, is searching for a new method of verifying transactions. According to them, the switch will reduce the energy cost of each transaction by 99.95 percent
In addition, many important players, including the Energy Web Foundation, Rocky Mountain Institute, and the Alliance for Innovative Regulations, are pledging to turn the crypto industry into a carbon-free investment by 2030.