The environmental impact of cryptocurrency

Charities are increasingly giving donors the chance to give to good causes through cryptocurrencies such as Bitcoin and Ethereum. But is this the right option for all charities given emerging evidence of the environmental damage caused by these currencies which use energy intensive block chain technology?

 

Research has already charted the damage of this technology and how it is rivalling harm done by other industries, including in agriculture and even fossil fuels.

 

Here we explore crypto’s carbon footprint and whether charities should be concerned.

 

 

Crypto’s carbon footprint

 

Evidence emerged in 2022 that cryptocurrency may contribute as much to climate change as the beef and crude oil industries.

 

This looked at sustainability criteria, signalling when climate damages may be unsustainable, with researchers finding that Bitcoin mining “fails all three” of its tests. This includes finding that:

• Per-coin climate damages are increasing rather than decreasing
• Bitcoin mining damages exceed the price of each coin created
• Each £0.81 in Bitcoin market value was responsible for £0.29 in global climate damages

This cost to the environment is “in the range between beef production and crude oil burned as gasoline” with researchers adding “taken together, these results represent a set of sustainability red flags”.

 

The climate damage of producing digital currency has averaged 35% of its market value over the last five years, comparable to the beef industry where its harm averages 33%, warn researchers.

 

Cryptocurrencies also cause more environmental damage than gold mining, which has a climate impact of 4% of its market value, although this is largely caused by its high value, compared to the cost of extraction from the ground.

 

According to estimates Bitcoin uses 150 terrawatt hours of power each year, which is more than is used by Argentina.

 

 

Charity sector concerns

 

Greenpeace in the US has launched a campaign to “clean up Bitcoin” amid concerns around the environmental damage of the cryptocurrency. It stresses that it is “not against cryptocurrency” but against the environmental damage it causes. This is an important point for the charity as it is looking to back green options for cryptocurrency and switch to low energy ways of producing the currency. It is also concerned with Bitcoin’s reliance on coal-fired power.

 

World Wildlife Fund UK has also raised concerns around the technology. This includes halting a fundraiser using the OxPolygon blockchain platform amid concerns around the environmental impact of producing the non-fungible tokens (NFTs) involved.

 

International Animal Rescue has stopped accepting crypto donations following an internal policy review. It said in a statement in 2022 that “as a conservation charity, we pride ourselves on our integrity and values”.

 

It added: “While crypto currency transactions have become more common and there has been a demand for individuals and communities to support our mission by making crypto and NFT donations, there are some underlying concerns about the environmental sustainability of these blockchain technologies.”

 

 

Green crypto options

 

To counter the impact of the damage to the planet of cryptocurrency, eco-friendly cryptocurrencies are being developed that keep the same ethos of the technology, to allow users to track their use. Charities are advised to consider the different environmental impact of cryptocurrencies before investing or accepting them as donations.

 

Advice includes checking latest figures from the Crypto Carbon Ratings Institute and to monitor latest news and comments on social media from environmental experts.

 

Examples of green cryptocurrency include:

• SolarCoin, which uses solar power, with each megawatt hour of energy produced creating a solarcoin. While it has obvious green advantages it has relatively low returns compared to other currencies so is less attractive to investors
• Nano, which is a more environmentally friendly cryptocurrency by not keeping a chain of every transaction as many others do. Instead, each user controls their own account, using connected blocks. As a result, it uses 0.0000112KWh, which is less than Bitcoin and Ethereum
• Signum, which uses a network users’ hard drives to verify transactions, which also reduces the carbon footprint of cryptocurrency
• Cardano, which allows users to become members of a cryptocurrency network rather than mining new coins. This method saves around 0.5 kWh per transaction and uses 0.001% of the energy that Bitcoin produces for the same movement of the currency
• Tamadoge is a ERC20 token that is used for creating and issuing tokenised assets that people can invest in and stands for “Ethereum request for comment”. It uses digital pets within a Tamaverse, which are less environmentally harmful to keep than those in the real world

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