Cryptocurrencies have taken the world by storm, and almost everyone knows about these digital coins. Some of the names you have frequently heard include Bitcoin, Litecoin, Ethereum, and Monero. Interestingly, despite these currencies having no physical form, since they are virtual currencies, is it possible that they could be negatively affecting our planet? It is an issue of concern to the University of New Mexico researchers and they recently launched a research program and released a paper into the environmental effects caused by mining cryptocurrencies.
An In-depth Look at Cryptocurrencies
A cryptocurrency is basically an online digital means of exchange. It is used as a decentralized form whose exchange, production, and recording is done online, within a cryptocurrency community. However, it requires “miners” whose work is to complete and solve complex computer algorithms that offer safe cryptographic validation to a particular exchange. Once they have done their work, they get certain units of the same currency as a reward.
As a result, cryptocurrencies do not require any traditional bank, third party support, or a government to control the transactions. In addition, the production of cryptocurrencies comes with a limit and only a certain number of, for example, Bitcoin, will be created. Once the number is reached, the digital currencies available will sustain themselves in circulation.
With all this in mind, interestingly, the mechanism that is used when mining cryptos and which makes these currencies so attractive, comes with the use of a lot of energy.
The Research
A paper was recently published by three professors of economics from the University of New Mexico. Titled ‘Cryptodamages: Monetary value estimates of the air pollution and human health impacts of cryptocurrency mining’, it describes the human health and climate impacts of the exchange of digital currencies. In their research, the professors stated that they were able to find the monetary value of the impact of crypto mining through the amounts of energy used, utilizing a battery of economy assessment techniques.
According to Robert Berrens, who is a Professor of Economics at the University of New Mexico, he explained that the mining of cryptos is done by using energy-consuming specialized computer hardware. This mining can also take place anywhere in the world. Berrens went on to explain that mining camps are emerging all over the world. These are large-scale operations, which are created to include the fastest internet connections as well as the cheapest energy sources. The big problem comes in as to whether or not, the energy that is being utilized is green.
In the paper, it states, “With each cryptocurrency, the rising electricity requirements to produce a single coin can lead to an almost inevitable cliff of negative net social benefit.”
According to the paper, while mining practices create financial value, the amount of electricity that is being consumed is in fact generating “cryptodamages.” This term is used to describe the climate and human health impacts of the digital currency exchange.
To put it into perspective, the researchers estimated that in 2018, every $1 of Bitcoin value that was created, was responsible for $.49 in health and climate damages in the United States. They also explained that for every single crypto coin that is produced, the electricity requirements are so high, that the end result will be a negative net social effect.
The researchers also claim to have looked at climate change arising from greenhouse gas emissions as a result of the electricity production and the effects that local air pollutants have on the community.
It is important to understand that there are currently some cryptos that are mined with alternative production schemes which require significantly less energy use. The researchers from the University of New Mexico are hoping that their recently published paper will encourage alternative, healthier methods of mining cryptocurrencies so as to product the health of people and the environment.