Failure of encryption could be a win for the environment

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It has been a turbulent year for cryptocurrencies. Cryptocurrency giant FTX is just the latest in a string of bankruptcies, collapsing spectacularly after a run on the company and a mad dash to recover client assets. Once worth $32 billion, it now owes up to a million creditors, a fact that has sent its former CEO and partners into a tailspin.

The uncertainty plaguing the cryptocurrency world is obviously devastating for investors and finance geeks, but it could actually have a silver lining.

Cryptocurrency is terrible for the environment. And a cryptocurrency crash could have a positive impact on greenhouse gas emissions and the future of the digital currency.

To make money on cryptocurrencies, “miners” use supercomputers to solve complex mathematical equations before their peers. If they win this algorithmic race, they can add a “block” to the network and are rewarded with bitcoins. This is referred to as “blockchain mining” and is energetically expensive, time consuming, and only occasionally rewarding.

Cryptocurrency mining used to be possible with a home computer setup, but as it has been corporized, it now requires huge computers with cooling systems and motherboards. This requires huge amounts of energy, typically obtained from burning fossil fuels.

According to a White House report, cryptocurrency mining accounts for 140 million tons of CO2 per year released into the atmosphere, or 0.3% of all global greenhouse gas emissions. This amount is higher than the emissions produced by many individual countries, including Argentina and the Netherlands.

The competitive nature of blockchain mining is also problematic. Barney Tan, professor of information systems and technology management at the University of New South Wales, said in an interview: “… if 1,000 miners compete and only one wins the reward, the resources invested by the other 999 miners who have lost are wasted”.

Because speed is so critical to winning the blockchain race, cryptocurrency miners are using the most readily available sources of energy. Earthjustice reports that some are paying to revitalize dying fossil fuel plants in order to get electricity faster.

And it’s not just greenhouse gas emissions. The computer chips used to mine cryptocurrency are made from toxic chemicals and precious metals that require literal mining to produce, devastating the Earth’s landscapes and depleting finite resources. These chips are also highly specialized and quickly become obsolete, ending up in landfills as cryptocurrency mining strategies evolve.

Additionally, cryptocurrency mining operations can generate air, water, and noise pollution in the communities where they are located. Local residents and businesses are forced to shoulder the burden while crypto companies make a profit.

Benjamin Jones, an environmental economist, said in a statement released by the University of New Mexico, “We find several cases between 2016 and 2021 where Bitcoin is more harmful to the climate than a single Bitcoin is actually worth. In other words , Bitcoin mining, in some cases, creates climate damage greater than the value of a coin.”

Sure, pre-existing monetary options aren’t without fault. The United States alone prints billions of banknotes every year, requiring huge amounts of water and electricity. Many of the world’s major banks invest our money in the fossil fuel industry, contributing to the climate crisis. All money has a role in harming the planet, but cryptocurrencies still stand out.

Compared to cash, cryptocurrencies carry three times higher environmental costs, according to a study by Tufts. And given that far less than physical money is used, cryptocurrency has the potential to wreak havoc on the planet as it continues to grow as a currency.

That’s why the accident might not be a bad thing.

Cryptocurrency failures mean fewer carbon emissions are produced, and as attention turns to cryptocurrency fragility, more can be done to address negative environmental impacts.

On Nov. 22, in the midst of the catastrophic collapse of FTX, New York became the first state to ban cryptocurrency mining techniques that require large amounts of energy.

The FTX crash also leaves a gap in the market for more sustainable crypto companies. After the release of the White House report in September, Ethereum, the largest blockchain behind bitcoin, has switched to a more environmentally friendly mining strategy. This change could reduce its carbon emissions by 99% over the next few years.

There are also emerging cryptocurrencies, such as solarcoin, that rely on renewable energy to power their mining. In the wake of the current cryptocurrency crisis, these sustainable alternatives have a better chance of success.

Crypto vulnerabilities were exposed last month. While this crash is heartbreaking for those who have invested their lives in bitcoin, it has opened people’s eyes to the drawbacks of the digital currency.

Sometimes failure can be a good thing. With sustainable mining strategies, a focus on renewable energy, and improved awareness of impending carbon emissions, this cryptocurrency catastrophe could translate into a win for the environment.

Provided by the Columbia University Earth Institute

This story is reprinted with the kind permission of the Earth Institute, Columbia University http://blogs.ei.columbia.edu.

Citation: Encryption Failure Could Be a Win for the Environment (2022, Dec 21) Retrieved Dec 21, 2022 from https://phys.org/news/2022-12-crypto-environment.html

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