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Cryptocurrency carbon footprint in the US is worse than 6m cars

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Climate activists are taking aim at proof-of-work approaches for cryptocurrencies, as a new report warns crypto’s sizable carbon footprint in the US alone is equal to that of 6 million cars.

  • Sierra Club and EarthJustice’s new report highlights how proof-of-work (PoW) cryptocurrency mining worsens the climate crisis and harms communities.
  • A spike in cryptocurrency mining in the US since its ban in China in 2021, risks overloading the grid, especially in states like Texas, where it is vulnerable.
  • The report cites industry trade practices of manipulating state regulations to access polluting power sources that are harmful to communities and taxpayers.

The report provides an in-depth view of the impact of the PoW on energy consumption, as well as the possible policy responses that could curtail its further rise. Its call to action to policymakers cites the cost to taxpayers from the industry’s questionable claims, and drain on national and regional grids.

Written before Ethereum’s merge was complete, the report does not incorporate the potential of converting all cryptocurrencies to a proof-of-stake (PoS) mechanism, which Ethereum claims required 99% less power than PoW.

Heavy energy use inherent in proof-of-work DNA

A proof of work (PoW) blockchain network is the most commonly used consensus method, used by 58% of the cryptocurrencies (crypto) in the market, including BitcoinPoW’s high energy use comes from the time it takes to verify a block on the chain.

The resulting data and computing power needed also generates hardware waste, including environmentally hazardous materials. A recent White House Office of Science and Technology report warns that cryptocurrency mining could prevent the US from meeting its climate goals. 

Based on findings in the report, the PoW system inherently lacks the ability to generate energy efficiency from increased use. The lottery-system nature of generating coins means that the amount of energy used by  the system does not scale with the number of miners.

The rise of crypto (Bitcoin) mining in the state of Texas provides a good example of PoW’s power consumption. The report has tracked 2,234 MW of crypto mining facilities that were built since mid-2021, eight of which were between 150 and 300 MW each.

The state grid in Texas is particularly vulnerable to overloading, which has been exposed during periods of extreme temperature conditions. During the summer of 2022, consumers were asked to limit their energy usage by the operator of Texas’ main power grid, ERCOT.

The electricity consumed by the almost 100,000 machines capable of being served by a 300 MW facility could power 49,000 homes. The lottery-like nature of PoW crypto awards means these machines must be always running to maximise the chances of a win.

Rewards and a finite supply are also exacerbating PoW’s current energy profile. At its inception, Bitcoin rewarded 50 coins for a successfully validated transaction, which has since declined to 6.25 coins in 2022, with a further halving of rewards projected in 2014.

With just over 1.9 million of the 21 million Bitcoin left to mine, an acceleration of mining activities to maximise rewards is the only likely outcome. Valuing speed and computational power without regard for the price of energy also has implications for fossil fuel generation. 

Its high energy use and large carbon footprint has also attracted additional criticism – initially touted as a way to decentralise and democratise finance, the wealth of the crypto industry is now increasingly concentrated, with many large financial institutions involved.

Greenwashing claims hide potential risks to the grid

The report views the crypto currency industry and its trade organisations as greenwashing and fictitious, stemming from an awareness of its high energy consumption amid calls for decarbonisation in the wider economy.

Some common claims from miners relate to mining facilities being located close to wind or solar power generation plants —  that this makes them sustainable, and they only use wasted energy from solar or wind overproduction.

These claims are easily refuted by the fact that these facilities do not have a special claim to the renewable energy in question, as they draw power from the grid. Also, mining operations run at all hours to maximise rewards and profits, debunking the second claim.

Further, since most grid power still comes from fossil fuels, adding new, large mining facilities increases the output from fossil fuel power plants. 

Proponents of mining have also cited it as a way to justify building new renewable power and stabilising the grid, when in actual fact the clean energy allocated to crypto makes it unavailable to grid decarbonisation and other needs that have a greater public benefit.

Policy and regulation needed to curb PoW 

Absent a complete shutdown of operations, as seen in China in 2021, local, state and federal government policies can help limit further harm to the environment, public health, by limiting its energy consumption, which is being paid for by the public at large. 

Withdrawing subsidies or tax incentives to US crypto mining operations, which are a burden to taxpayers and ratepayers is an obvious first step. As many as 33 states had bills supporting crypto developments, and 17 had enacted new laws to incentivise the industry.

Kentucky waives taxes on energy purchased by crypto mining companies, while Wyoming exempts them from any natural gas purchased to power mobile mining rigs.

Not only does the industry consume a disproportionately large amount of power, but it does little in the way of job creation. In fact, it is another example of the disintermediation of humans in generating societal value by the use of technology. 

Other local policy responses could take the form of enforcing, or in some cases enacting, laws to ensure environmental and noise pollution, as well as local planning codes for the location of mining operations.

Utilities and grid operators should have separate tariffs and rate structures for heavy users like the crypto industry, and special scrutiny should be applied to maintaining or increasing obsolete (fossil fuel) capacity to respond to mining operations, at the expense of the average taxpayer.

PoW crypto mining has shown little regard or consideration for the greater good in its rush to generate profits. Accounting for half the electricity used by the global banking sector, it has generated a small fraction of the monetary value, in comparison.

While showing no signs of self-regulation, its unchecked race to consume energy appears certain to cause irreparable harm to national decarbonization plans, to say nothing of the financial harm already caused, or potentially awaiting unsuspecting retail investors.

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