@ green | May-June , 2021

Mining accounts for approximately 0.5 per cent of global electricity consumption

BY KAVICKUMAR MURUGANATHAN

Artist impression of Tesla ’ s Elon Musk .

Over the last year , cryptocurrency has traded anywhere between US $ 5,000 and US $ 40,000 . Could prices rise further ? That remains a mystery .

While mining and investing in cryptocurrencies is lucrative , it comes with a mammoth carbon footprint . Let us analyse what this footprint entails .

According to studies , the cryptocurrency industry consumes approximately 77 to 110 trillion W / h of power annually . To put things into perspective , these figures are comparable to the annual national energy consumptions of countries like Chile and the Netherlands and about 17 times the annual electricity consumption of Google ’ s operations .

In totality , cryptocurrency mining accounts for approximately 0.5 per cent of global electricity consumption .

In terms of carbon footprint , cryptocurrency mining results in about 37 million tonnes of carbon dioxide produced annually . This is comparable to the annual carbon footprint of New Zealand .

Cryptocurrency ’ s energy use is attributable primarily to the vast amount of data crunching . The process of mining cryptocurrencies involves a multitude of computers solving complex math problems .

The first person to crack the code and arrive at a solution is rewarded with cryptocurrencies , such as Bitcoin . How much bitcoins you can mine is dependent on how much computing power you can allocate to the problem .

Vicious arms race for energy

This effectively means bitcoin miners invest in more computing hardware equipment that runs perpetually 24 hours a day . With an increasing success rate in decoding the algorithms , the price of cryptocurrencies rises . This greater competition incentivises greater participation in the cryptocurrency ecosystem .

This leads to a vicious arms race for energy to power computing systems for mining cryptocurrencies .

The energy footprint required to mine cryptocurrencies is slowly gaining attention among investors . But its revenuegenerating capabilities far outweigh the environmental considerations that need to be made when considering such investments .

Cryptocurrencies are being amalgamated into energy transition trades . Tesla ’ s recent purchase of Bitcoins and plans to accept Bitcoins as a form of payment for its electric cars are examples . This calls into question the environmental credentials of such business portfolios .

( Tesla boss Elon Musk has since reversed that decision . He was concerned over the amount of energy it took to mine bitcoins , with much of it done in China using cheap , climate-destroying thermal coal .)

The cryptocurrency mining community , for its part , is spinning its own narrative around the sustainability of the industry .

One such narrative labels the industry as a load balancer that transfers intermittent or stranded electricity from local grids without stable demand . The fear is it could go to waste to economic assets in the form of cryptocurrencies .

The other narrative postulates that the cryptocurrency industry can potentially drive the global movement towards the mass adoption of renewable energy .

Currently , it is reported that 39 per cent of mining activities are powered by renewable energy , mainly in the form of hydroelectric power generated from dams .

Cryptocurrency miners are increasingly looking to locate their mining centres near renewable energy farms . Such farms can overproduce electricity during periods of low demand that can be used for mining .

This presents a win-win value proposition where the miner gets low-cost power . In contrast , the renewable farm gets a long-term customer .

Epicentre of an ethical conundrum

It is worth noting that half of the world ’ s cryptocurrency mining capacity is situated in China . They are powered mainly by a mix of cheap coal and hydroelectricity . In some countries , cryptocurrency trades have appeared to influence the price of electricity in the utility market .

Mining activity will continue to outpace the availability of stranded or intermittent electricity across the world . We are at an epicentre of an ethical conundrum .

We need to ask ourselves whether we should champion a virtual currency that has yet to gain formal recognition in the financial world . It could drain our natural capital as we strive to green our grids and decarbonise our world .

Together with financial regulatory bodies and national grid operators , the global mining community has to come together to address this . For a start , alternatives to a carbon tax such as more direct taxation of mining companies ’ electricity use can be considered .

If that ’ s insufficient , then perhaps even more direct taxation on the companies that manufacture cryptocurrency mining hardware could be considered . In some countries , such as Inner Mongolia , grid operators have pulled the plug on mining operators simply because of their overuse of the grid .

Blackouts and power outages have occurred in some areas of Iran as miners drain the grid of electricity required for functional needs .

Another potential initiative would be to consider having alternative sources of energy that are formed as by-products of industrial activities to power mining activities .

One method would be to utilise flare gas , a by-product of oil and gas drilling operations emitted into the atmosphere , to power mining operations .

Larger scheme of things

However , more long-term solutions are required to combat cryptocurrency ’ s growing carbon footprint . Energy-efficient digital transaction methods need to be explored to shift away from a system that supports the exploitation and overuse of energy to determine the winner .

Scrapping the current mining process to shift towards a less computationally demanding approach towards solving codes would need a strong consensus among the mining community .

There have been new conceptual practices in the industry , as such ‘ proof of stake ’ and ‘ sharding ’ that have helped reduce the computational energy load of mining operations . Still , these need to be analysed in the larger scheme of things .

Other ecosystem players , such as digital payment platforms accepting cryptocurrencies , have a massive role in this . They have to agree on best practices that measure , report , reduce and offset these emissions .

There have been talks of concerted clean energy investment initiatives to support ‘ green ’ mining companies . Still , these have yet to formally take root .

Lastly , cryptocurrency investors have to make a conscious ethical decision about whether they want to champion this industry . It drains energy that could be channelled towards an environmentally or socially beneficial purpose . — @ green

Kavickumar Muruganathan is a lecturer at TUM Asia & a renewable energy professional .