Cryptocurrencies and the environment
The popularity of electronic money continues to grow. However, at the same time, risks and costs are increasing. In particular, many people are interested in how cryptocurrencies affect the environment. Assets are mined through mining. This is a very costly process that requires a lot of electricity.
The future of ecology and cryptocurrencies
The mining process is impossible without large computing power that consumes huge amounts of light. Most types of crypto, including bitcoin, use algorithms that require increasing computing power over time. The result is an increase in energy consumption. The procedure is carried out using fossil fuels such as coal and gas. The consequences are obvious: emissions of harmful substances into the atmosphere and deterioration of air quality. Therefore, the future of ecology and cryptocurrencies are inextricably linked. Fortunately, we have already learned how to minimize the risks. Yes, the process itself is still expensive and harmful, but not as much as it was 5-10 years ago.
In addition, funds can have an impact on nature through their transactions. In some cases, when the load on the grid is high, energy consumption increases, which leads to additional emissions and increased pollution. Of course, this is why eco-activists have a bad attitude towards them.
Some networks have started using alternative methods. They consume less energy. For example, Proof-of-Stake instead of Proof-of-Work. In addition, asset developers and exchanges can use environmentally friendly methods of generating power, such as solar and wind energy. They allow:
- reduce the negative impact on the environment;
- make the procedure cleaner;
- reduce financial risks.
But so far, cryptocurrency projects based on ecology are inferior to traditional ones. Because of this, the damage and bad consequences do not disappear.
In general, the impact of mining or transaction processes can be significant, but there are ways to reduce it. Most importantly, the companies themselves are interested in this. That is why they regularly work on the production of new technologies and less harmful equipment.
Energy consumption for cryptocurrency mining and its environmental impact
Most digital assets (Bitcoin) use the consensus mechanism of Proof-of-Work, which requires significant computing power and consumes a huge amount of electricity. The more resources are involved, the more significant volumes are needed to create new blocks and maintain the network.
According to research, the annual electricity consumption for Bitcoin mining in 2021 exceeded the consumption of entire countries:
- Argentina;
- The Netherlands;
- Ukraine.
When it comes to energy consumption for cryptocurrency mining and its environmental impact, it is important to remember that technologies lead to the generation of significant amounts of carbon dioxide emissions, which exacerbates global warming and the burden on the planet's ecosystem.
However, there are also relatively safe, clean mining methods that are characterized by significantly lower energy consumption. When highlighting different approaches to solving the problem of the environmental impact of cryptocurrencies, it is first of all worth noting the use of alternative methods. In particular, Proof-of-Stake and Proof-of-Authority. In these methods, miners do not use computing power to solve complex mathematical problems, but use other methods. These include ensuring the reliability of transactions or bidding on a share in the network. This helps to reduce the cost and losses for the planet as a whole.
Regulation of environmental aspects of cryptocurrencies in Ukraine and the world
Some countries are already implementing laws and regulations aimed at reducing the negative environmental impact of e-money. Our country is still lagging behind in this regard. Ukraine currently has no laws aimed at regulating such aspects of cryptocurrencies. However, in early 2021, the NBU announced the need to control digital transactions in the country, including to protect the environment.
As for the global experience, China has been struggling with the use of electronic means in the country for several years, primarily due to the high cost. In 2021, the Chinese authorities announced a ban on mining in several provinces of the country. Therefore, the regulation of environmental aspects of cryptocurrencies in Ukraine and the world is gaining momentum.
The United States and the European Union are also actively discussing issues of environmental support, and a number of countries are already introducing relevant regulations. For example, the state of New York in the United States has passed a law requiring miners to report their carbon dioxide emissions and imposing a fine for exceeding the limits.
In general, work in this area is an important step towards reducing the destructive impact of mining. A number of countries have already begun to take appropriate measures, and such initiatives are likely to increase in the near future.