Cryptocurrency Price Collapse Could Influence Climate Change. But how?
Over the years, the issues surrounding global climate change have been very alarming. Scientists and environmentalists have warned people about the impact of people’s activities in the future if no change is made. With various people pointing fingers at big industries’ huge contribution to this environmental issue, one culprit that people talk about is cryptocurrency. This is because the energy consumption of cryptocurrency is enormous, and its environmental implications are far-reaching. However, could the collapse of cryptocurrency prices influence climate change? Read on to know.
The cryptocurrency market has a volatile nature, which means the values of the digital assets are not stable and changes from time to time. Due to these, crypto traders constantly look for ways to earn in this field, such as trading. Crypto traders, especially newbies, seek guidance by engaging in platforms like Coinbase and Bitcoin Motion for a secure trading environment and high chances of earnings.
Another way that people earn in this field is through cryptocurrency mining, a process in which Bitcoin transactions are validated on the network before being added to the blockchain ledger. This is done by solving challenging cryptographic puzzles which aim to verify the block of transactions that are updated on the decentralised blockchain ledger. However, this has been one of the hot topics regarding cryptocurrency and climate change.
While there is no clear way to calculate how much energy is used for mining, it is estimated that the most widely-mined cryptocurrency network, Bitcoin, used an estimated 118.47 Terawatt-hours of electricity per year while the second-largest cryptocurrency network, Ethereum, uses 87.29 Terawatt-hours electricity per year. Research shows that the energy consumed by crypto mining is likely to increase over the next years.
Effect Of Crypto’s Price Drop On Climate Change
Keeping track of the carbon footprint produced by cryptocurrency is complicated. While fossil fuels are the predominant source of energy in the majority of the countries that allow crypto mining, these miners prefer to go out of their way and seek out the most inexpensive sources of energy to remain profitable – which in most cases, means relying on new alternative energy installations.
Proof-of-work mining is when high-end computers repeatedly take random shots at guessing a long string of digits; the amount of power is referred to as hash rate. Suppose the hash rates decrease due to power cuts or price dips. In that case, the difficulty of guessing the strings is automatically adjusted to ensure the network can declare a winner every ten minutes. Research indicates that bitcoin’s carbon intensity increased by around 17%, with only 25% of bitcoin miners using renewable energy while over 60% rely on coal and natural gas.
In regards to the effect of crypto’s price on climate change: the higher the values of crypto, the more cash mining outfits are prepared to waste on this electricity until the costs of winning outweigh the rewards. As the crypto’s price drops, the financial incentive to waste energy for mining should be lower, which is good for the climate.
Can Cryptocurrency Go Green?
Experts are not optimistic when it comes to the willingness of some governments to regulate their way out of cryptocurrency’s climate problem. Countries like China, where the majority of mining took place, have clamped down on the industry, but the operations simply moved to countries with fewer rules and cheaper energy.
Cryptocurrencies can go green and shift from their current energy-intensive method of verifying transactions, which involves pitting computers against one another in a race. This process doesn’t require continual competition and significantly decreases energy use. Currently, fossil fuels are responsible for about 60% of Bitcoin mining, and in 2021, a group of more than 150 crypto companies signed the Crypto Climate Accord.
The Crypto Climate Accord consists of a deal where companies promised to reach net-zero emissions by 2030 by switching over to renewables and purchasing offsets. However, offsets gained mixed reviews about their effectiveness in preventing carbon emissions, and renewable energy could be better used for essentials.
Governments from different countries around the world have started to accept and adopt cryptocurrencies as tools for their economic growth. Despite its excellent benefits, experts have also tried to express the worrisome future that could happen if cryptocurrency activities keep on emitting huge carbon footprints. While cryptocurrency price drops are good for the climate, experts in the crypto world have been looking for ways to eliminate the negative effects on the environment while ensuring cryptocurrency follows a constant positive path.
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