By Leah Garden
June 29, 2022
Green energy in bitcoin mining. Alternative energy sources in cryptocurrency mining. Double exposure. Image via Shutterstock/Rzoze19
The word cryptocurrency engenders immediate reactions. Some individuals live and die by the value of bitcoin or ethereum, while some (like my family) assume crypto miners actually dig into the earth to access currency. As a professional in the climate sector, I associate cryptocurrency with immense energy usage.
But why? What are the inputs that fuel (pun very much intended) this dilemma? Why is bitcoin labeled as unsustainable, and will that always be the case? Are life-cycle assessments (LCAs) considered for crypto mining? What are politicians advocating for with crypto-focused policy proposals, and how can they shape the future of this market? 
If you’re seeking an answer to “Is cryptocurrency sustainable?” then know now, this is not the essay for you. Absolutism stifles opportunities for nuance, and what is technological innovation if not nuanced? Strap in, it’s time to finally understand the environmental impact of the crypto craze gripping the world.
Okay, gird your loins, we’re about to dive into the weeds to make cryptocurrency’s intense energy usage make sense.
Cryptocurrencies such as market leaders bitcoin and ethereum use blockchain platforms to create a decentralized ledger about transactions or touch points in a network, storing data within each individual block. These blocks are linked to create a chain. 
Forbes’ description of blockchain as “units called blocks containing information about each transaction, including date and time, total value, buyer and seller, and a unique identifying code for each exchange,” really nails the descriptive nail on the head.
No third-party entity or C-suite has ultimate control over each block, making it impossible to retroactively alter the contents. Thus, a blockchain is a decentralized, unalterable timeline of data. 
Currently, there are two primary mechanisms underlying how transactions are managed; proof of work (PoW) systems and proof of stake (PoS) systems.

Both bitcoin and ethereum use the PoW approach. In that model, crypto miners (around 1 million at any given time) are the individuals creating and linking the blocks to one another — and they receive compensation for doing so. Each time a transaction occurs, the miners race against one another to find the specific computational algorithm that matches the bitcoin just spent.   
The mining component of the PoW approach, as you can probably surmise, requires a lot of energy to continuously power the hundreds of thousands of computers racing against each other to solve a block.
The alternative proof of stake (PoS) system uses far less energy. PoS is literally defined as “a consensus mechanism for processing transactions and creating blocks in a blockchain.” What that actually means is:
It is impossible to specifically and accurately quantify the amount of energy required by each server to add a block under either the PoW or PoS models. Every piece of hardware has different power-consumption needs depending on the algorithms it is running.
But what is obvious is the massive amount of energy wasted in PoW-supported crypto. It is estimated that one bitcoin transaction requires up to 1,200 kilowatt-hours of energy, the equivalent of 100,000 Visa transactions. It quickly adds up.
According to Alex de Vries, founder of online publication Digiconomist, PoS uses “99.99 percent less energy, if not more, than PoW.” 
“Aha!” you might exclaim, thinking that PoS is the answer to the crypto sustainability conundrum. My friend, we’ve only scratched the surface. 
According to Hermine Wong, director of the Coinbase Institute and director of policy at Coinbase, a software program that provides easy access to the crypto economy, due to the decentralized nature of cryptocurrency, no one entity can unilaterally decide to convert all mining from PoW to PoS. 
“Participants in each network vote on its governance,” Wong wrote to me via email, “how any participant votes would likely depend on the individual participant’s evaluation of the tradeoffs.” A.k.a., if it means losing money, individual miners likely won’t vote to make the switch, presumably the reason that ethereum, despite its best efforts and frequent public announcements, has delayed the ultimate jump from PoW to PoS for years. 
But Leah, you may ask, if the tech is being powered by renewable energy, doesn’t that make all of this a moot point?
If the world were black and white, then simply switching from burning coal to wind to power any and all crypto mining would be the end of the conversation. But alas, this is merely the article’s halfway point.
According to the Crypto Carbon Ratings Institute’s “Accounting for Cryptocurrency Climate Impacts” report, the primary source of GHG emissions in cryptocurrency is the actual generation of energy for the hardware. Thus, renewable sources fare better than fossil fuels. But it’s never that simple.
In December, the asset management firm CoinShares reported that renewables contributed under 30 percent of energy consumed by bitcoin. And though renewable energy is just as competitive, if not more economical than fossil fuels, its variability makes it a risk. As we all know, cloudy days happen and wind sometimes stops blowing. 
Therefore, more often than not, crypto miners set up shop near power stations, using the excess energy typically burned off into the atmosphere. This practice has even revived failing coal and natural gas plants, stalling forward progression in the transition to renewable energy.
Short answer: Yes. Even if cryptocurrency is running off renewable energy, there is still the issue of energy prioritization. A population center dependent upon energy from one source cannot afford to divert part of that supply to crypto mining. 
After China banned crypto mining in 2021, large swathes of miners relocated to the United States. States such as Texas were happy to lease land and energy, but there was a price. The energy requirements of mining centers maxed out local power grids. Extreme cold snaps and heat waves (only made worse by the escalating impact of climate change) provided additional strain on the grids, forcing miners to switch off during peak demand hours. CBS News reported that the energy required to mine one bitcoin in Texas is enough to power a single Texas home for 62 days. 
Legislation introduced around the world is attempting to curb the carbon footprint of cryptocurrency, such as; 
These policies/pleas for help, successful or not, indicate a political appetite for environmental oversight. The recently passed gun control bill is proof (another pun!) that change, no matter the size, can take decades to manifest. 
I told you I wouldn’t provide an answer to whether cryptocurrency is sustainable, and I am holding fast. There are still many factors I didn’t have the space to address, such as the steadily growing piles of e-waste, the cradle-to-grave carbon footprint of the hard drives, the carbon footprint of cooling the hardware in mining centers and the impact of corporate investments into specific crypto entities (looking at you, Tesla). 
But there are potential paths forward that companies and countries are pursuing to curb crypto’s negative impact. Kenya sent out a call for miners to take advantage of its geothermal energy, creating a less damaging mining hub in Nairobi. President Joe Biden ordered his administration to produce a report laying out the potential environmental pitfalls and opportunities of cryptocurrency, aiming to create a blueprint for responsible development of digital assets. 
In the private sector, Intel designed a chip specifically to make mining more energy-efficient, and ex-Twitter CEO Jack Dorsey has already purchased the new tech. Ethereum’s anticipated transition to a PoS system just became a more promising reality after a successful test run June 8.  
At this point in time, cryptocurrency is too (relatively) new and unresearched for any one entity to propose a “sustainable” path forward. Studies that include LCAs and policies that establish incentives for renewable energy-based mining centers are needed for the industry to show real change. I will keep an eye on the horizon and inform you of the multiple factors that must be considered when evaluating impact. We’ve only scratched the surface today. 
[Want more great analysis of climate tech and innovation? Sign up for Climate Tech Weekly, our free email newsletter.]
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