Cryptocurrencies such as Bitcoin or Ethereum have captured headlines around the world. But these virtual coins take a lot of power to generate and maintain, leading to very real damages.
A new study from The University of New Mexico (UNM) looks at the environmental and public health impact of cryptocurrency mining. The costs of this process, they found, are “substantial”, and likely underestimated by many. Cryptocurrencies are a digital form of exchange, and most high-profile ones today rely on energy-intensive means of production (referred to as ‘mining’).
Coins in a chain
“What is most striking about this research is that it shows that the health and environmental costs of cryptocurrency mining are substantial; larger perhaps than most people realized,” said Benjamin Jones, UNM Researcher and assistant professor of economics.
One of the selling points of cryptocurrencies is that they rely on a decentralized, peer-to-peer network in which exchanges are recorded by the entire community. Digital public ledgers are kept for these “blocks” of exchange and are then tied together to create the ‘blockchain‘. Every transaction an individual coin took part in is recorded inside that very coin, is uneditable, and can be accessed publicly.
In theory, this removes the need for a third party such as a bank or government to control and confirm transactions in case of a dispute. Furthermore, cryptocurrencies are designed to be finite — ‘mining’ eventually runs dry — meaning there is a total maximum number that can ever be in circulation. Both the blockchain and the caps are maintained through the systems of users themselves.
However, cryptocurrencies aren’t free. The team assessed energy expenditure on cryptocurrency production and put a monetary figure on its cost to society at large.
“Our expertise is in estimating the monetary damages, due to health and environmental impacts, of different economics activities and sectors,” Berrens explained.
“For example, it is common for economists to study the impacts from energy use connected to production and consumption patterns in agriculture, or with automobile production and use. In a world confronting climate change, economists can help us understand the impacts connected to different activities and technologies.”
Cryptocurrency mining relies on specialized, energy-thirsty computer hardware and can be performed in any location. Because of this, large-scale mining operations (called ‘camps’) tend to cluster in areas where Internet speeds are high and energy costs are low. Since camps aren’t very concerned in the source of that energy, they often end up consuming power generated by plants that run on fossil fuels (which generate pollution).
The team holds that although mining practices do generate financial value, their high energy consumption is generating what they call “cryptodamages” — costs in human health and climate impacts.
“With each cryptocurrency, the rising electricity requirements to produce a single coin can lead to an almost inevitable cliff of negative net social benefit,” the paper states.
“We looked at climate change from greenhouse gas emissions of electricity production and also the impacts local air pollutants have when they are carried downwind and across local communities,” Goodkind said.
Throughout 2018, the team estimates, every $1 of Bitcoin value caused $.49 in health and climate damages in the United States. At one point in 2018, the cost in damages it took to create one Bitcoin matched the value of the coin itself. Those costs arise from pollutants generated by the burning of fossil fuels (CO2, fine particulate matter, nitrogen oxides, and sulfur dioxide).
It’s not just public health that’s impacted by these pollutants. The team says that both production of these currencies, as well as the Proof-of-Work (POW) schemes used to maintain them and run transactions will require “ever-increasing computing power and energy use,” Berrens explained. In the context of our efforts against climate change, these emissions aren’t inconsequential. The team hopes that by highlighting the impact of cryptocurrency mining on climate, they can spur policymakers and the miners themselves to foster less energy-intensive mining methods. The team says that the miners are in the spotlight here, as “the ability to locate cryptomining almost anywhere […] creates significant challenges to implementing regulation.”
The study didn’t take into account energy expenditures involved in cooling down the machines used to mine cryptocurrencies. That means even more energy is being consumed than what the study estimates.
The paper “Cryptodamages: Monetary value estimates of the air pollution and human health impacts of cryptocurrency mining” has been published in the journal Energy Research & Social Science.