In a classic case of oversimplification, digital currency mining is taking a beating in the media lately. You’ve likely heard this statistic being circulated: the current quantity of annual energy consumed to mine digital currency globally equals the energy consumption of the country of Denmark.
It’s pretty scary sounding stuff. And it seems logical to assume that using all of that energy to mine digital currencies must be bad for the environment…
It’s partly true. Mining cryptocurrency does consume a considerable amount of electricity. However, there are a couple of key problems with using this information to make a case against digital currency:
The environmental impact of mining depends a great deal on how you get the energy you consume.
My company, VARIO is mining a variety of digital currencies using hydroelectric power in British Columbia, Canada. This renewable energy, drawn from turbines propelled by falling water, has minimal environmental impact, other than the dams themselves causing changes to the environment back when they were built. BC’s hydro dams were built with excess capacity and, as far as I know, there aren’t new dams being built to support digital mining.
If miners are drawing from clean, renewable electricity, the environmental impact is negligible.
This, of course, varies greatly around the world and totally depends on where and how a region gets its electricity.
The traditional financial system also has a large environmental impact.
The current financial system produces vast quantities of printed money. The process takes energy and mints are big environmental culprits. But it’s not just printed money that makes an environmental impact: moving money from one financial institution to another consumes energy and causes considerable pollution. Just think about the tens of thousands of ATMs and the huge centralised servers running 24/7.
It’s pretty hard to calculate how much energy this whole financial system consumes and how much pollution is caused, but I think it’s fair to say that it’s probably (at the very least) equivalent to digital currency mining (relative to the amount of money being processed).
Here is a detailed breakdown of the energy and environmental costs of printing and minting fiat currency for USD:
- Water use during paper making: 1 million gallons / day = 1.4 billion litres per year
- Water use during printing: 250,000 gallons / day = 0.35 billion litres per year
- Waste ink & pulp sludge = 6 million pounds = 2720 tonnes
- Electricity use during printing: 97850 MWH of electricity = 0.35 million GJ
- Electricity use for pulp making = Same as electricity used during printing = 0.45 million GJ
- Ink usage = 3540 tonnes
- Over 7100 tonnes of cotton
- Over 2300 tonnes of linen
Take these stats with a grain of salt, as they are estimates. But just think, these numbers are strictly for US dollar production, never mind the rest of the world. We’re talking a lot of environmental costs here, not just electricity. And keep in mind, fiat paper cash only lasts for a few years before it needs to be printed again.
So, is cryptocurrency mining really as terrible as it’s made out to be in the news? I would suggest it is a superior form of currency that, with mass adoption, would cause far less environmental damage, when fairly considering all the factors.
While it’s tempting to make or repeat an exciting headline about digital currency mining using as much electricity as the country of Denmark, it’s important to look at the whole picture. I hope you’ll keep this in mind next time someone complains about the environmental cost of digital currency mining – and even more, keep in mind who this misinformation would be benefiting.
Jason Pigeon, CEO, VARIO