A coalition of environmental organizations and crypto billionaire Chris Larsen has launched a campaign seeking to change bitcoin’s code so to decrease its hefty energy use. The effort found that moving from one software code (proof of work) to another (proof of stake) could reduce climate emissions by a whopping 99.9%.
Bitcoin has become highly popular among investors, but its energy use has become a problem. Bitcoin produces around as much CO2 as countries like Croatia or Kenya, which has alarmed environmental organizations and lawmakers, pitting the cryptocurrency at odds with efforts to tackle the climate crisis. Now, this new campaign seeks to find ways to make bitcoin better for the environment, while also keeping its overall appeal.
“We know the crypto community is overwhelmingly motivated by a sense of progress, fairness, and good intentions. Many advocates are vocal about addressing climate change. The dream of so many early crypto innovators is within reach — but only if the industry gets serious about crypto that runs on low energy,” the campaigners write.
Bitcoin and energy use
Last year, the cryptocurrency world announced its own version of the Paris Agreement. The Crypto Climate Accord describes itself as a “private sector-led initiative for the entire crypto community,” working towards decarbonizing the sector. Its goal is to transition the crypto industry to only renewable energy sources by 2025.
But why does the crypto industry need a climate agreement? Because it has a very large carbon footprint that keeps on growing. A 2019 study, for example, estimated that Bitcoin’s power consumption emitted 22 million metric tons of CO2 the previous year. For context, that’s about 10% of the global railway sector’s annual emissions.
Crypto’s energy issue mostly comes from the method of mining coins, known as “proof of work”. To get coins, miners use processors to solve puzzles to ensure security and authenticity. Their systems have to find out a particular block’s key (a code by an algorithm) and match their guess to the block until they find the right code line. This stage is very processing intensive — and consequently, very energy intensive.
To make matters even worse, most crypto mining takes place in countries with low energy prices and an energy matrix largely based on fossil fuels (especially coal). This was mainly the case in China, which used to account for about two-thirds of mining worldwide. But that’s no longer the case, as the government has largely banned the activity and driven companies to other countries, such as the US.
The problem shouldn’t be underestimated. Bitcoin consumes about 120 terawatt-hours (TWh) of energy in one year, which is equivalent to the energy use of the Netherlands, according to estimates by Cambridge University’s Bitcoin Electricity Consumption Index (CBECI). We keep mentioning countries because bitcoin actually emits more emissions than most nations on the planet. As a country, bitcoin would rank 32nd in the world by energy consumption — clearly a problem worth addressing.
The way forward
The new campaign, called Change the Code Not the Climate, is being coordinated by Greenpeace USA, the Environmental Working Group, and several other grassroots organizations questioning bitcoin mining facilities in their communities. They are calling on bitcoin to change the way mining is done to tackle its large carbon footprint.
One of their biggest tools at hand involves using alternative mining programs. In 2021, developers introduced a new approach called “proof at stake.” It’s less energy-intensive than proof of work as it doesn’t need every miner to be online to verify transactions. Instead, certain participants are selected as randomly selected as validators.
Bitcoin’s main rival, Ethereum, is now working on a major software overhaul to shift from proof of work to proof at stake, which is projected to reduce its energy consumption by 99%. This could leave Bitcoin as an outsider, the campaigners emphasize, which are now targeting corporations and key stakeholders involved in the bitcoin world.
Still, those attracted to crypto for its security don’t seem to care much for proof at stake. Users have questioned that it’s easier for a bad actor to dominate a proof of stake space rather than a proof of work one. Also, it can be easier for validators to validators to gain more coins than other users, and the technical skills for such roles have a barrier to entry.
At this point, it’s difficult to say that there’s an immediate fix to crypto’s energy use. The Crypto Climate Accord suggests boosting renewable energy use, but it’s not an option at the moment. There are not enough renewables to meet climate goals even without taking crypto into account so it’s essential that crypto becomes as green as possible. Running crypto on renewables will still take a long time, but this would be a step in the right direction.