On May 18, 2021, police in the county of West Midlands in England prepared to raid a unit on the Great Bridge Industrial Estate in Sandwell. It had all the characteristics of an illegal cannabis farm: there was lots of wiring, many people were coming and going throughout the day, and a police drone detected a large amount of heat emanating from the building.
Imagine the officers’ surprise when they entered the unit and the cannabis plants were nowhere to be seen, but a hundred Antminer S9’s – specialized computers built for the sole purpose of mining cryptocurrency – each with spinning fans pulling in cool air, each connected to an elaborate system of ducting to vent hot air out of the building. Mining cryptocurrency is not illegal in the UK, but this operation was found to be stealing thousands of pounds’ worth of electricity and the computers were seized (BBC News, 2021).
On the same day, China announced that it was cracking down on bitcoin mining and trading out of concern for the country’s financial stability, and warned its financial institutions (banks, online payment processors, and others) to not offer any services involving bitcoin (Reuters, 2021).
Besides illegal activity and financial stability, there is another case to be made for regulating cryptocurrency: their power consumption. It takes a tremendous amount of power to run machines and keep them cool, as evidenced by the West Midlands mine discovery. And with more than 75 percent of Bitcoin’s global mining network operating in China, the crackdown becomes necessary if China wants to meet its carbon emission reduction goals under the Paris Agreement before 2030 (Jiang, Shangrong, et al., 2021).
Cryptocurrency mining consumes a great number of resources by design, which is necessary for maintaining network security and stability, which in turn is an attractive feature for many bitcoin traders. However, it comes with environmental concerns: cryptocurrency mining is a large producer of carbon emissions and electronic waste, and proposed solutions to these issues are uncertain at best.
To help shed light on how cryptocurrency mining consumes so many resources, I will explain some terms that will be used throughout this essay. The word “cryptocurrency” is derived from cryptography, the practice of encoding and decoding messages that cannot be read by third parties. It reflects the method by which units of electronic currency are created, or “mined”: by continuously solving algorithms (similar in concept to the Little Orphan Annie decoder pin from A Christmas Story, but far more complex).
All cryptocurrencies rely on a decentralized ledger system called a “blockchain” to operate; transactions are recorded in “blocks.” A copy of this ledger is distributed to all computers on the cryptocurrency network, and each additional block added to the chain verifies the authenticity of the block before it. This makes it extremely difficult to modify the contents of each block for nefarious uses, while also making it possible to exchange coins without the need for a third-party broker to be present.
Blockchains have the potential to eliminate commission fees and streamline virtually any industry that relies on third parties to operate or has long supply chains that need to be monitored, e.g. food products, used car sales and even hotels. On the flip side, the freedom within anonymity and lack of state regulations that are characteristics of cryptocurrency provides cover for illegal activities such as money laundering and illegal drug sales, at least for some time (Bohannon, 2017).
Speaking of regulations, digital currency is not considered legal tender by many countries, and is outright banned in a few. The United States considers it a commodity. And, as for the coins and their actual values, Bitcoin is the most popular cryptocurrency coin and Ethereum is the second most popular. Their value fluctuates from day to day, but at the time of writing, one bitcoin is worth $37,119 USD and one ether is worth $2,695 USD.
The connection between a blockchain and carbon emissions is convoluted. The actual process of solving complex algorithms is simply generating millions of strings of numbers and letters every second until the cipher is solved. One can imagine that the load put on a computer to process so much information is a consequence of this method, but the high cost in time, electricity and hardware is actually intentional. Similar to how students in math classes are required to show their work on tests to prove that they didn’t cheat, owners of mining rigs will not receive coins until their machines have completed this brute force work. Therefore, the fastest way to earn bitcoin and ether is to run special high-performing machines whose only job is to mine coins 24/7.
Some operations have ballooned into dedicated facilities containing thousands of machines. Paying for the electricity and hardware to run such an operation is another aspect of proving that the work has been done and that the reward is deserved. As a result, Bitcoin uses more energy than some countries. Alex de Vries writes in “Renewable Energy Will Not Solve Bitcoin’s Sustainability Problem” that it is impossible to pinpoint the exact amount of energy used in mining because there is no way to know how many machines are connected to the network (nor are these facilities subjected to environmental reviews); still, he pegs the amount of electricity consumed in 2018 at somewhere between 40 TWh to 62.3 TWh. This is comparable to the energy consumption of Hungary and Switzerland.
Maintaining a mining rig requires more than simply plugging an Antminer S9 into a wall socket. Putting such a high-stress load on a computer will heat it up; a small room filled with computers without adequate ventilation can become a fire hazard. To mitigate the cost of cooling, some companies take their mining operations to colder parts of the world, such as one mine in the Alps where chilly air is pumped into the facility in lieu of air conditioners (Hardy, 2019). Water cooling is also an option, but returning the now-superheated water to its source may damage the local ecosystem, as asserted in a recent lawsuit against the Greenridge Generation facility in New York (Taylor, 2020).
Cheap electricity is necessary for miners to ensure that their operation is profitable, thus most operations are set up in rural China. Some rely on hydroelectric power, but hydroelectric is not feasible year-round because it is affected by seasonal rain, flood and droughts (China Water Risk, qtd. in Vries, 2019), therefore forcing these farms to pull power from coal-fired plants anyway.
Then there are the issues that have nothing to do with energy: equipment running all day and night are loud enough to bother nearby residents, reducing their quality of life (Fox, 2018). According to the European Environment Agency’s 2020 interview with environmental noise expert Eulalia Peris, long-term exposure to noise has negative effects on our health, including being a contributing factor in new cases of heart disease and sleep disturbance.
The equipment itself doesn’t last forever, either – new, more efficient hardware is constantly in development, only to become obsolete after 1.5 years. The bitcoin mining industry cycles through 10,948 metric tons of e-waste every year (Vries, 2019). Unfortunately, because these machines are created for one purpose only, they cannot be repurposed for other applications and immediately become worthless.
On top of that, all of these problems are only going to get worse over time: the cryptographic problems that mining rigs must solve will become progressively more difficult so as to stave off market saturation, an inevitability. To keep up the current pace of income, mining farms will expand the number of machines, leading to even greater electricity consumption, electronic waste and carbon emissions. This unchecked growth has the potential to hamper any progress a country makes toward meeting the terms of the Paris Agreement.
Bitcoin and Ethereum’s massive consumption of resources is by design, but the resulting high rates of carbon emissions is a negative externality, as evidenced by developers’ efforts to create more sustainable alternatives. In fact, individuals and companies alike are sometimes initially unaware of the environmental impact of using digital currency.
There have been a few examples in just the past few months: Joanie Lemercier, a visual artist based in France, had sold multiple pieces of his work for ether before learning about its high electricity usage. He published an op-ed about his experience titled “The problem of (Ethereum) CryptoArt” in February 2021, where he stated that the sale of his work on an Ethereum-based website had “consumed in 10 seconds more electricity than the entire studio over the past 2 years.” Lemercier’s article has since been updated with more environmentally-friendly options, but notes that some companies still haven’t addressed the carbon footprint issue. ArtStation, a portfolio website for professional artists in gaming, film and media industries, announced in March 2021 that they were planning to launch their own Ethereum-based art sales network, only to backpedal less than 24 hours later after facing backlash from their own community on social media (Calma, 2021).
If cryptocurrency mining continues at its current rate, it will threaten progress on meeting greenhouse gas emission targets. Supporters of cryptocurrency say there are ways to reduce both its costliness and carbon footprint, such as encouraging mining operations near wind or solar sites (Dajani, 2021). Another popular suggestion is purchasing carbon offset credits, though this option requires careful research as some projects have been revealed to be a scam (Peach, 2021). However, in order for mining farms to run on renewable energy, it would have to be competitively priced against cheap coal power produced in rural China. But with China’s aforementioned ban on digital currency services, it may be regulated regardless of any movement toward renewable energy sources in the next few years.
On our side of the ocean in May 2021, New York State Sen. Kevin S. Parker introduced Senate Bill S6486, which would “establish a moratorium on the operation of cryptocurrency mining centers” until those centers complete an environmental review. If this bill becomes law, it will be a positive step toward reining in cryptocurrency’s carbon footprint, thereby combating climate change by reducing the country’s carbon emissions overall.