In this last post for the week, we will be looking at various greener cryptocurrencies that have emerged in light of the negative backlash of the carbon-intensive Bitcoin.

Aside from the larger cryptocurrencies like Bitcoin and Ethereum, there are several hundred other cryptocurrencies that have emerged in the market, some of which serve as viable green alternatives of digital currencies.

SolarCoin is a cryptocurrency that was launched in 2014 by Nick Gogerty and Joseph Zitoli as a way to transfer value between people that want to use solar energy (Johnson et al., 2015). The blockchain operates in a way by rewarding SolarCoin users with more coins when they prove that they have generated solar energy via documentation or authorised electricity metering, which incentivises other individuals to use solar energy as well. Furthermore, as SolarCoin engages in using a proof-of-stake (POS) distribution instead of a proof-of-work (POW) distribution like bitcoin, making it less energy intensive. Instead of consuming a tremendous ton of energy for the searching process in the POW distribution where an individual with a greater computational power is awarded, a leader will be selected based on its stakes (their contribution to the blockchain network) to perform mining process and add a new block to the chain (Nguyen et al., 2019).

Additonally, according to Johnson et al., (2015), SolarCoin has a block consensus (a procedure where all the peers in the blockchain reach a common agreement on the existing state of the ledger) time of 1 minute compared to Bitcoin’s block consensus time of 10 minutes, rendering efficiency increases for the amount of blocks that can be transacted every day.

However, despite its greener appeal, the worth of the SolarCoin is minute compared to the colossal value of Bitcoin in the cryptocurrency market. In fact, there are many other cryptocurrencies such as Cardano and Algorand that make use of the greener POS network (La Monica, 2021), but the dominance of the Bitcoin in the market is still highly evident and extremely worrying.

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In the last post, we explored how booming cryptocurrencies such as Bitcoin require energy-intensive mechanisms like mining to operate. Though countries like El Salvador has accepted the cryptocurrency as legal tender, there are other countries and organisations that have been implementing regulations against these energy-intensive currencies to protest against the environmental pollution brought about by their usage.

For example, Tesla CEO Elon Musk had removed Bitcoin as a permitted currency to purchase Tesla’s vehicles, citing his concerns over the increased use of fossil fuels for bitcoin mining and transactions over a Twitter post (Abbruzzese, 2021). On a larger scale, China has implemented a nationwide ban on all cryptocurrencies, with one of the factors to be the high energy use needed to operate (University of Southern California, 2021).

While the regulation has been enacted to reduce carbon emissions, the problem of environmental pollution has unfortunately been worsened after the ban. This is due to the fact that Bitcoin miners were heavily dependent on China’s hydropower as their energy source (Sarlin, 2022). When the ban was enacted, these Bitcoin miners had to shift and find energy elsewhere, which resulted in their shift to dirtier energy sources such as natural gas in the United States (Sarlin, 2022). As hydropower is a much cleaner source of energy, the increase usage of natural gas to sustain cryptocurrency mining operations would result in an increase in the global carbon emissions. Therefore, this illustrates the difficulty in regulating cryptocurrency and the implications of its environmental pollution. Definitely, with the high demand of cryptocurrency usage, banning the process of mining would only serve to shift these miners to other dirtier forms of energy to capitalise on the existing market.

In my opinion, I believe that the environmental implications of cryptocurrencies is something that is extremely complicated to regulate. For one, the appeal of cryptocurrencies stem from its characteristics of legitimacy and anonymity in transactions. However, in order to fulfil these characteristics, energy intensive mining is required. Furthermore, as the cryptocurrency market continuously expands, with the bitcoin market alone thriving at a value of US$1.5 trillion (O’Malley and Zappone, 2021), the demand of cryptocurrency is certainly hard to ignore.

How then do we combat such an impenetrable source of environmental pollution?

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For the past month or so, I have been receiving countless social media advertisements on the topic of investing in bitcoin and various forms of cryptocurrency. However, I didn’t truly understand the concept of cryptocurrency and how it works nor did I understand the environmental implications of currencies like bitcoin. As such, let me break down what I’ve learnt thus far:

Bitcoin, like all other forms of cryptocurrency are mediums of exchange that only exist digitally (Cho, 2021). The appeal of the cryptocurrency is that these currencies are decentralised such that there is no central authority to form a regulating body over these currencies, reducing transaction costs and latency, and preserving forms of anonymity for the dealers (Farell, 2015). Surely, this would mean that the virtual transaction of money would reduce the need for producing physical currency, which would produce less impact on the environment?

This was not the case however as the decentralised nature of the cryptocurrency required a certain mechanism called ‘mining’ to be implemented to ensure the legitimacy of the exchange. In the case of Bitcoin, Bitcoin miners use high-powered computers to solve cryptographic puzzles that validates the transaction data (Mohsin, 2021). Mohsin (2021) further argues that because of the competitive nature of these proof-of-work blockchains, crypto mining has resulted in stratospheric energy expenditures.

For example, in June of 2018, each bitcoin mined required 60,461 kWh of electricity, with the total consumption of electricity just from mining bitcoin amounting to 47.9 billion kWh for the year (Goodkind et al., 2020). Furthermore, it has also been argued that bitcoin emissions alone can push global warming above the 2 degree celsius mark (Mora et al., 2018). To put things into a broader perspective, bitcoin is one of the many existing cryptocurrencies that are present in the market. As such, the energy-intensive mechanism of the entire cryptocurrency mining industry definitely creates an insurmountable amount of pressure on the environment.

Looking forward, I believe that the acceptance of bitcoin as legal tender by nation states such as El Salvador (Youkee, 2021) could potentially push forward the usage of cryptocurrencies, increasing the number of crypto transactions which would ultimately increase the rate of bitcoin mining. Thus, the environmental pollution related to cryptocurrency mining is very much real and not something to take lightly, especially with the rise of the digital age where anonymity is highly prioritised.

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