Cryptocurrency worsens the climate crisis
Cryptocurrency, and Bitcoin in particular, is still relevant today and is becoming an important factor in modern financial markets. Not surprisingly, the subject of cryptocurrency regulation in one form or another has become a major concern. China is already restrict Its use. Central banks around the world are looking at decentralized cryptocurrencies to assess their potential impact on financial stability, or even to issue their own digital currencies. Chairman of the Securities and Exchange Commission Gary GenslerGary GenslerSEC Increases Disclosure Requirements For Chinese Companies Seeking U.S. IPOs: Report Crypto Industry Seeks To Gain Momentum After Losing The Fight To The Balance / Sustainability Senate – Living tree “when Jesus was on Earth” threatened by rising seas MORE describes crypto trading as the ” Far west “ recently calling on Congress to create a protective regime for crypto investors. A major impasse for the critical infrastructure bill was the issue of taxation of crypto transactions. Others have proposed that “stablecoins” be regulated like banks.
Unsurprisingly, the crypto industry has developed a formidable lobbying force to avoid further regulation. The regulations are completely antithetical to the very idea of decentralized cryptocurrency.
Yet little attention has been paid to the environmental dangers of cryptocurrency. Yes, Elon muskElon Reeve MuskThe Hill’s Morning Report – Featured By Facebook – Biden Continues To Fight Chaos In Afghanistan Can SpaceX’s Elon Musk Help NASA Return To The Moon By 2024 After All? Hillicon Valley: QAnon ‘GhostEzra’ key influencer identified MORE attracted the usual hype when he first announced that Tesla would accept Bitcoin – then said (rather belatedly given the science) that since he learned of the environmental damage inflicted by cryptocurrencies, he would overturn that decision.
The impact of cryptocurrency on the environment is indeed very serious – perhaps the most important political factor against its growth.
Cryptocurrencies, Bitcoin and Ethereum in particular, are so damaging to the environment that they threaten to reverse any gains made from the transition to electric vehicles and reduced use of fossil fuels. Much of this consumption and production comes from the intensive energy and processing “mining” of Bitcoin and “proof of work”. Even now, Bitcoin’s total carbon footprint exceeds the total emission reductions from electric vehicles. Based on Cambridge Bitcoin electricity consumption Index, Bitcoin is already consuming more energy than the whole of Argentina (45 million inhabitants).
Digiconomist Bitcoin Energy Consumption Index estimates that Bitcoin and Ethereum together consume the same amount of electricity as Ukraine and Israel, totaling 52 million people. The carbon footprint of a single Bitcoin transaction is equivalent to nearly 2 million Visa transactions, or 135,229 hours of YouTube viewing! A single Ethereum transaction consumes the equivalent energy used by an average US household over 4.55 days. Additionally, the energy and carbon footprints of these two cryptocurrencies and others are expected to grow exponentially in volume as speculation, hype and crime continue to generate volume. Already, total crypto energy consumption “is roughly comparable to the carbon emissions produced by the metropolitan area of London“, According to The Gaurdian.
Besides these staggering energy consumption statistics, crypto is also increased competition for chips, for which there is already a global shortage preventing the manufacture of alternative energy devices, including electric vehicles. Crypto has already grown exponentially. Further growth will only widen its carbon footprint.
Given the intimidating targets for the carbon reduction we are facing in the United States and around the world, this development should be for everyone. If there were offsetting gains with crypto, it could be justified on a cost-benefit basis, as we do with electric vehicles (which do damage but less overall than combustion engines). Yet there are no real gains.
There are many classes of crypto adventurers: libertarian idealists who dream of being freed from sovereign monetary control; hardware and software players “mine” the hardware for a reward; traders who earn income from crypto transactions; speculators who ride the wild volatility of crypto; crypto “wallet” hackers; and criminals who exploit the relative degree of anonymity offered by cryptography as ransomware. Despite big claims about reducing transaction costs and freeing up ‘fiat’ currency, none of the legitimate players have advocated for crypto contributions to general well-being. Beyond the rhetoric, they haven’t even seriously tried to do it. Instead, they relied on the naivety of lawmakers, regulators and journalists.
Knowledgeable commentators have described crypto as a “giant bubble”. Yet regulators continue to be timid in approaching the subject. As the Biden administration urges the auto industry to switch to 50% electric vehicles by 2030, we are recklessly allowing crypto to escalate at a huge current and potential cost to our carbon footprint.
China has at least taken a step towards connecting crypto to climate change concerns: it has banned crypto mining. This activity will only move elsewhere. Lawmakers and policymakers should educate themselves now and act quickly to stop the counterproductive growth of this industry, however powerful their lobbying forces may be. If they don’t, even as the threat posed by global warming comes in “Red code“According to the Intergovernmental Panel on Climate Change, we will find ourselves in another situation where a strong industry will prevent us from advancing the common good and fighting climate change.
Laurent G. Baxter is Professor David T. Zhang of the practice of law at Duke University, where he also directs the Global Financial Markets Center.