Not everyone is yet accustomed to the term cryptocurrency! Bitcoins and other systems of currencies are prevalent in crypto. However, this system is based on blockchains and is completely energy-sensitive. Mining is a method that is often utilized to validate crypto but there are many other ways like through Bitcoin and Ethereum. These are the two leading cryptocurrencies that you can engage in. However, if you are concerned about the environmental impact of cryptocurrencies, then let us take you through this article to learn more.
What is the total energy consumed through Bitcoins?
There is no sure-shot way to determine the total energy consumption through Bitcoins or cryptocurrency mining however rough estimation can be made through hashrate and the commercially available mining rigs!
Cambridge Bitcoin Electricity Consumption Index shows that bitcoins are indeed the most widely used cryptocurrency network. It is estimated that 85 Terawatt-hours (TWh) of electricity. This was the energy estimate for Belgium and Finland.
Another such estimate has been made as well. The numbers are rounded to figures at 130.3 Terawatt-hours. Hence a total energy consumption of 1,455.8 kilowatt-hours of electricity per transaction is required. If we draw a comparison then the same amount of energy is consumed by the average American household over 49.9 days.
Next, let’s talk about Ethereum. It is the second-largest cryptocurrency network. The estimated usage of energy is calculated to be 62.77 Terawatt-hours of electricity per year, as calculated in the year 2022. But soon after that, the average estimation went further low towards 163 kilowatt-hours of electricity.
Ever since Ethereum came into being, the energy requirement has been reduced to 0.01 TWh per year, with one transaction using 0.03 kWh. Since the price continues to vary, the total energy consumption is also likely to vary from time to time.
Why does cryptocurrency mining require energy?
The energy consumption of cryptocurrency is a specialized feature, not a bug. This is an automated process where the transactions are validated with the interference of a third-party lime organization and banks. The transaction validation process is what requires a large amount of energy. The computational power of thousands of mining machines is taken into account. It is this form of dependency that ensures the security of the entire process and blockchain functionalities.
What are the environmental factors that are influenced by crypto?
Here is a more complicated part to deal with! Cryptocurrency does not have any carbon footprint as such. That is what makes this system rather complex to deduce when it comes to environmental effects. Fossil fuels are the most predominant source of energy where cryptocurrency is mined, miners prefer to stick to a source of energy that is cheaper and takes time to get exhausted.
It is calculated by the Digieconomists that the Bitcoin network amounts to about 73 million tons of carbon dioxide per year. Can you believe it? Well, it is true!
Several types of research were conducted at the University of Cambridge which concluded that most Bitcoin mining occurs in China, the US, and Kazakhstan. About 76% of the energy consumed in China is derived from coal and crude oil while China’s percentage of the global hash rate is 21, as reported by the Center for Strategic and International Studies. Considering the USA, 38% of mining takes place with electricity derived from fossil fuels. As a result of this, these three countries are highly dependent on fossil fuels with 72% of the world’s Bitcoin mining.
Would it be possible to make use of less energy in cryptocurrency?
Mostly, cryptocurrency miners are located where energy is abundant, cost-effective, and reliable. However, undergoing cryptocurrency transactions with minting new coins may not require so much energy. There is a new method which is called the PoS method( Proof of Stake) used to validate cryptocurrency transactions as well as mint new coins without the usage of cryptocurrency mining through extensive computing powers.
Another method of validation includes proof of elapsed time, proof of history, burn, and capacity being tracked. However, Bitcoins are the most popular cryptocurrency that is widely available and the mining cost along with energy costs are likely to remain.
While some cryptocurrency has large energy requirements, the tools for validations need to be considered as well. Much waste generation is also involved in cryptocurrency. Depending on these factors, some kinds of cryptocurrency may not be effectively signified as environmentally friendly. The energy footprints need effective measures shortly to be reduced. A large amount of electricity is spent through the validation of transactions every time you use Bitcoins. Not much information is available yet on how much of cryptocurrency is renewable but studies are being conducted.