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Explaining Cryptocurrencies and Why They’re Killing the Planet

Explaining Cryptocurrencies and Why They’re Killing the Planet
Mary Imgrund
Written by Mary Imgrund

While it’s true that all currency is based on arbitrary values, some are more imaginary, and more damaging, than others. Bitcoin and other cryptocurrencies are relatively easy to procure, but they require so much energy to “mine” (more on that later) that they have the potential to significantly damage the planet. These new digital currencies are using so much energy that they threaten to hasten global warming by substantially increasing the world’s electricity consumption.

The first and most popular cryptocurrency is Bitcoin. It was created in 2009 by an anonymous person or group that goes by the name of “Satoshi Nakamoto,” and is probably the one cryptocurrency you’ve heard of thanks to its recent newsworthy spike in value. To understand why it requires so much power, you need to understand how cryptocurrencies work.

How bitcoin and cryptocurrencies impact the environment

How cryptocurrencies and blockchain work

Cryptocurrencies are decentralized, purely digital currency that run on blockchain technology. Decentralized means that there is no single body overseeing and verifying transactions, unlike other legal tender that have banks and federal agencies to regulate them. A blockchain is a decentralized digital ledger or a digital record of transactions. They are ongoing, and past transactions can never be deleted, one can only add to the list. The blockchain ledger will only ever get higher. Then, transactions are bundled into a block, and every time a block is verified, it is added “on top” of the blocks that came before it. Like a chain of blocks, hence the name. Blockchain, in the case of cryptocurrencies, is a ledger of all past transactions. So, the block acts like a bank of sorts, keeping track of who owns what, who owes who, and because it is decentralized, the theory is that it is safer than a traditional bank which could be hacked.

All currency is based on an arbitrary value — without an agreed upon value, it becomes worthless. Cryptocurrencies operate on scarcity. There are artificial limits built into the blockchain that determine how many of units of each crypto will exist; for example, Bitcoin has been capped at 21 million.

How to acquire cryptocurrency

There are three ways to get cryptocurrency. You can either buy it via one of the many exchanges, sell goods in exchange for it, or mine for it. “Mining for cryptocurrency” really just means doing the hard work (“mining”) of creating blocks to create new bits of currency into the economy.

Mining for cryptocurrencies can use either specialized hardware or software to verify and add transactions to the block in exchange for tiny amounts of cryptocurrency. This is the only way to create new currencies, as there is no federal reserve to “print” more. To mine for cryptocurrencies, a computer attempts to verify and add new transactions to the blockchain, and to do that, they must solve a cryptography problem (think of them as computational mathematical problems). Essentially, they need to solve complex puzzles to add to the ledger. The computer in question verifies the transactions, the preexisting blockchain then adds them (watch the video above for a visual lesson). Once one computer solves the problem, every other place that hosts the ledger can instantly verify if it is correct. The mining phase weeds out irregularities (scammers and fraudulent transactions). To avoid inflation, bitcoin, for example, makes the problems more complex and the rewards smaller to keep the amount of bitcoin available somewhat steady.

How cryptocurrencies are impacting the environment

Blockchain and crypto are both interesting technologies that have applications outside creating new money. Salon and The Atlantic have turned to cryptocurrency mining to earn revenue while keeping their content free, especially when some readers block ads. They do this by letting readers opt in to a new service which would allow the site to use some of their unused computing power to mine for Monero, one form of cryptocurrency.

How cryptocurrencies affect the environment

You might think, wow, this seems like it eliminates the need for physical currency, making it better for the planet. But that’s not actually the case considering just how much computing power and electricity you need to verify and solve a block in the chain. Digiconomist claims that bitcoin mining accounts for about as much electricity as the entire country of Denmark, or approximately 3,071,823 US households. While this is not yet a dangerous amount of power consumption, bitcoin mining is still an energy intensive process. As the price of bitcoin and mining hardware goes up (it recently spiked at the beginning of the year but has dropped since) the incentives to add more power and servers increases. Since many countries like the United States and China rely on burning coal to generate electricity, more crypto mining will result in more coal burning. Since coal is one of the worst contributors to global warming, any environmental benefit from switching to a digital currency would be lost if coal emissions increase. Mike Reed of the Blockchain Program Office for Intel Corp. told the Washington Post that “if the price of bitcoin continues to rise, it will continue to use more energy [which represents] an economic incentive to add more mining equipment to the network… and that incentive is built in.”

Row of bitcoin miners set up on the wired shelfs. Device for mining cryptocurrency. Cryptocurrency mining farm.

Row of cryptocurrency miners set up on the wired shelves of a cryptocurrency mining farm. Credit: shutterstock.com

Iceland is currently the world’s leader in cryptocurrency mining server farms, and these farms use so much electricity that they threaten to outpace the country’s power grid. They use more electricity than the cumulative private consumption in Iceland and server farmers continue to migrate there as the climate is ideal for servers in danger of overheating.

Cryptocurrency is not likely to become less popular, though its price is extremely volatile. If it continues to become more valuable and popular, however, it will prove dangerous to the planet unless the mining process changes to be less energy dependent. Some networks like Ethereum have taken steps to make mining more energy efficient, but that might not be enough as more server farms are built. The crypto world is fascinating (and sometimes fun, like in the case of CrytopKitties, which I played while researching this article), but has some serious environmental repercussions that need to be considered as it breaks into the mainstream and become more popular.

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Title image credit: shutterstock.com

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About the author

Mary Imgrund

Mary Imgrund

Armed with an undergraduate degree in English Literature and Creative Writing, Mary Imgrund’s writing has been published in both local magazines and national journals. After graduating, she co-founded The HBG Flea, a monthly curated market for handmade and vintage goods in Harrisburg, PA in hopes of empowering artisans to find a consistent audience and  shoppers to buy more sustainably. She is currently pursuing a Master’s Degree in Political Communication at American University. Currently splitting her time between D.C. and PA, she tries to stay sane with splurging on skincare, tending her plants, and doing yoga.


  • Mindless article. Turns out the “catastrophic enviromental damage” caused by cryptocurrencies is the electricity that is involved. Thanks for the input; think about the energy that you could have saved if you have decided not to write up a whining and shallow article.

    • Hi Dennis, I appreciate your input, but your comment seems mean spirited. The primary point of this article was to explain crypto as a primer and discuss it from an environmental perspective, as I believe our audience expects from this site. Rather than whining, I’m discussing the environmental implications before they become an acute problem. xoxo

      • Hi Mary, I have written an article on similar topic and Amanda loved it but she isn’t replying. Can you help me with that?

        • Hi Henry, I’m sure she’ll reply eventually! We live on opposite sides of the world, so I can’t exactly lean over and let her know, haha.

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