The Currencies That Are Killing Our Planet
Is the high energy cost of mining bitcoin and other cryptocurrencies damaging our planet? According to the Intergovernmental Panel For Climate Change (IPCC), our ever-growing hunger for energy comes with a huge price tag attached. The IPCC tell us the “scientific evidence for warming of the climate system is unequivocal” and that this trend is bad news for humanity.
The planet is warming, oceans are rising, glaciers retreating, the frequency of extreme weather events is increasing and our oceans are acidifying. Scientists have concluded that the major cause of this is the burning of fossil fuels which release CO2 into our atmosphere.
For this reason, much has been made of the rising energy consumption of bitcoin and other cryptocurrencies. As reported by Alex Hern for The Guardian, as well as countless other outlets, “The power consumed by the entire bitcoin network was estimated to be higher than that of the Republic of Ireland”. In total, bitcoin miners are estimated to consume around 8.27 terawatt hours of energy every year. There is no denying that this is a considerable amount of power, but to place it in a wider context you must first consider the total cost of old currency in terms of its energy and resource consumption.
The Fiats
Let’s be clear: when it comes to environmental impact, cryptocurrency doesn’t hold a candle to the ecological wrecking ball of fiat currency. Fiat not only consumes more energy in its birth than bitcoin mining (11 terawatt hours versus 8.27) but fiat is doubly damaging at its death, when it must be destroyed by burning, releasing even more CO2 into the atmosphere. The lifespan of some fiat banknotes is only four or five years before they are removed from general circulation and burned. By comparison, a mined bitcoin is mined forever, without the need for refreshment or renewal.
As for the raw material from which bitcoin is mined, it is pure energy. The energy cost of producing fiat is just a small fraction of the overall resource expenditure. Banknotes and coins consume huge amounts of raw materials and resources. Most fiat money is manufactured from cotton and linen although some is polymer-based plastic. A 2010 study by Ahlers found that the printing of the U.S. dollar alone used 3,530 tonnes of ink, over 7,100 tonnes of cotton and 2,300 tonnes of linen. Waste products from its manufacture include a total of 2,720 tonnes of pulp and ink sludge.
Coins are no less damaging, typically manufactured the world over with metals such as copper and zinc. While fiat requires the manufacture of lumps of metal to divide notes into smaller amounts, bitcoin only requires that you place the decimal point in a different place. As far as environmentally friendly solutions go, there really is no contest.
Next, let’s examine the energy consumption of bitcoin. While bitcoin mining does consume more energy than the Republic of Ireland, it only uses 7% of the electricity consumption of the state of Texas. In fact, the power use of bitcoin mining expressed as a percentage of global energy consumption is only 0.13%. Since almost all of the cost of mining bitcoin is in energy, the solution to carbon neutral bitcoin is in carbon neutral energy. Carbon neutral power already exists in the form of renewables and nuclear; it’s just a case of choosing it over coal and oil, as miners are, many of whom have set up camp close to sources of cheap renewable energy.
The cost of bitcoin security and transport is also highly favorable when compared to fiat. For the average person, securing bitcoin is as simple as remembering your key and password, and transporting is as simple as a button press or two. Compare this with armored vehicles, bank vaults, and ATMs for fiat. According to independent research by RBR London, cash withdrawals from ATMs are expected to rise by 6% annually in the developing world and 1% everywhere else. Continuing to blindly favor fiat currency will mean we need to put many more vehicles on the road, burning more fossil fuel in the process. Another round scored in favor of crypto.
Production of the Euro
If you’re still in any doubt about the wastefulness of fiat as compared to cryptocurrency, simply take a look at this video showing the production of the 50-euro note. As you watch the more than 20 stages of the manufacturing process shown, consider that thanks to Brexit the map of the EU in these notes is already out of date.
In examining the currencies that do the most damage to our planet it quickly becomes clear where the blame lies. Bitcoin and its fellow PoW cryptocurrencies are not the problem — that dubious accolade goes to the dollar, pound, yuan, euro and rupee.
