Environmental Effects of Mining

Cryptocurrency has been surrounded by controversies, from being a highly sought-after currency to facing setbacks and then, making a strong comeback. This journey has been a major topic of discussion in the financial sector.

Currently, cryptocurrency is accepted by countries like the United States, the United Kingdom, Canada, and Australia while in China, Pakistan, Tunisia, and Bolivia bitcoin is generally banned. Whether crypto-currency will replace the use of fiat money or will finally be accepted by world leaders as a form of exchange is still up for debate.

However, the source of cryptocurrency is also shrouded by mystery. It is a fact that many people are unaware that cryptocurrency is mined. Not in the way you might assume especially when compared to the mining of minerals like gold and diamond, which typically have adverse effects on the environment, Nevertheless, the question of whether this form of mining impacts the environment remains a topic of discussion.

This article aims to uncover the environmental effects of mining as it concerns cryptocurrency. However, before diving into details, we'll first explore what cryptocurrency is for those unfamiliar with the term, followed by an examination of crypto mining and how it affects our environment.

Cryptocurrency is a currency that is not subject to inflation or political influence and offers greater security and faster transactions.

It aims to revolutionise industries such as finance, and healthcare. The process of generating certain cryptocurrencies is done digitally through a mechanism called Mining.

In more complex terms, mining involves verifying and bundling transactions into blocks, carried out by solving cryptographic puzzles. Miners compete to solve mathematical problems, and the first to solve the problem adds a new block of transactions to the blockchain.

In simpler terms, mining is a process that cryptocurrencies use to generate new coins, verify and secure their transactions on a blockchain network.

Crypto Mining process is done digitally and it uses a specialised computing resource to add blocks to a PoW blockchain; that is a proof-of-work [PoW] which is a mechanism that ensures security, validates transactions and adds new transactions to a blockchain.

A blockchain is also referred to as a decentralised ledger [a ledger being a digital record-keeping system used to store and manage information about transactions], where the blocks represent groups of transactions added to the ledger sequentially. Adding a block to a blockchain validates and records the latest batch of transactions.

Some blockchains run on a system called a proof-of-stake consensus algorithm which is used by blockchains to secure and validate transactions within a network. This method is different from proof-of-work and examples of blockchains that run on this system include Ethereum, Solana, etc.

Bitcoin is the most mined cryptocurrency in the world because it is the first and most widely recognized digital currency. Thousands of miners contribute to securing its network and validating transactions through the PoW (Proof of Work) system.

The difference between proof of work and proof of stake is how they both secure and validate transactions and also how much energy is used to power the computational process.

The challenges of crypto-mining include;

Energy Consumption: Mining cryptocurrency is energy-intensive and the farms where mining occurs consume a lot of electricity.

Cost: Investing in hardware and electricity is expensive therefore, mining cannot be done by individuals.

Environmental Concerns: Mining releases a carbon footprint especially when it is powered by non-renewable sources of energy.

In 2021, a Bitcoin mining power generation called greenidge generation was called out for allegedly discharging large volumes of hot water into Seneca’s Lake. The company repurposed an abandoned power plant in 2019 which led to increased carbon emission and water usage.

Residents raised concerns that the warm water discharges were heating Seneca Lake beyond the state water quality standards, potentially violating the Clean Water Act and other environmental regulations. There have been other cases of concern related to cryptocurrency mining in other places.

This process of cryptocurrency mining is very complex and it requires technical knowledge and skills. Cryptocurrency mining utilizes large computing power that is measured in hashes per second. A miner's hash rate as it is commonly called, requires large electricity consumption which impacts the environment and also the profitability of mining.

High Energy Consumption: The environmental concerns are primarily due to its high energy usage, and some mining operations consume as much electricity as small countries like the Netherlands and Argentina.

Carbon Emissions: Electricity used for mining comes from fossil fuels like coal and natural gas, which leads to high carbon emissions.

Electronic Waste: Heavy metal from mining hardware becomes outdated as new technology emerges, this can cause hardware waste and the hazardous materials can affect soil and water

High-Water Usage: High water usage is required in some mining facilities, for cooling systems and air humidification, and could also be used to generate electricity that powers devices.

There are different strategies required to reduce the environmental effects of mining, and they include;

Carbon Offsetting: Carbon offsetting is the reduction or compensating of carbon dioxide or other greenhouse gases from industrial or other human activities, by creating or investing in environmental projects that balance out carbon footprints. Since the 1970s the US Clean Air Act allowed emissions in high-pollution areas to occur only where reduction occurred elsewhere to offset the increases. For instance, planting of trees to compensate for carbon emissions caused by mining, or renewable projects like building wind farms to replace coal-fired power plants.

Wind Power: The use of renewable energy sources wind power would reduce carbon emissions because wind energy is carbon-neutral and doesn't release greenhouse gasses during production. It also reduces reliance on coal or natural gas which are used generally in generating electricity in different regions.

Wind energy might fluctuate because it's not always consistent in the sense that the energy from the wind might not be sufficient to carry out mining operations. Also, its infrastructure can be expensive to set up but over time it becomes cost-effective.

Greenidge for instance has pioneered the integration of clean power plant operation and carbon-neutral cryptocurrency mining aiming to reduce the impact of mining on the environment, some other companies are also adopting more renewable energy sources like geothermal and hydroelectric energy alongside wind energy.

Solar Power: Solar power can also help mitigate the impact of mining on the environment. Solar power produces electricity without releasing greenhouse gases which makes it a clean energy source. It replaces the need to use fossil-fuel electricity which pollutes the air and causes climate change issues. Apart from the initial set-up cost which can be expensive, it saves costs in the future, also these solar-powered mining farms can be built in areas with a lot of sunlight.

Waste Energy: Known as WTE (waste-to-energy) is a process of converting municipal solid waste or garbage into usable energy like heat or electricity. Municipal solid waste typically contains materials like paper, plastic, and wood. The waste is burned as fuel in a large incinerator equipped with a boiler and a generator to produce electricity.

The waste-to-energy process releases CO2; however, it is considered more environmentally friendly compared to landfill waste. It can be referred to as a partially renewable source of energy because it processes biogenic waste such as food and wood, which are forms of renewable energy. Additionally, it can use technologies like carbon capture to trap CO2 from burning waste, significantly reducing carbon emissions.

Geothermal and Hydroelectric Energy: Geothermal energy uses heat from the interior of the earth to generate electricity, this is a renewable form of energy, and it also produces very low greenhouse gas compared to fossil fuels.

Hydroelectricity involves generating electricity using the force of water to turn turbines connected to a generator which in turn produces electricity. It doesn't release or produce CO2 during this process making it a clean and sustainable source of energy.

The use of geothermal and hydroelectric energy can also significantly reduce the carbon footprint of mining cryptocurrency.

Proof of Stake (POS): Proof of Stake is an alternative consensus algorithm for processing transactions and creating new blocks on a blockchain. This mechanism validates entries into a distributed database (blockchain), and ensures its security.

Unlike PoW (Proof of Work), PoS does not involve solving complex mathematical puzzles. Instead, validators are chosen to create new blocks and confirm transactions based on the cryptocurrency they stake as collateral.

The validation process involves checking the legitimacy of transactions rather than performing computational tasks. However, participating in PoS requires owning cryptocurrency to stake. Therefore, new users can purchase cryptocurrency from cryptocurrency exchanges like Binance, etc. The purpose to validate transactions, and add new blocks to a blockchain securely.

The PoS system consumes less energy compared to PoW, making it an environmentally friendly option. By reducing the need for massive computational power, PoS reduces the carbon footprint associated with cryptocurrency mining.

The demand for cryptocurrency increases the carbon footprint because crypto mining uses a huge amount of energy. Most cryptocurrency mining operations occur in areas where cheap electricity is generated from minerals like coal, which releases carbon dioxide into the atmosphere.

The world is moving towards renewable sources of energy. Therefore, to protect the environment from carbon and other greenhouse gas emissions, more sustainable practices, such as using solar, wind and hydropower to power mining facilities need to be adopted. This can help to mitigate the impact of crypto mining on the environment.