Photo courtesy of Pexels
November 2, 2022
Bitcoin, the first ever cryptocurrency, was established in 2009 has grown in value astronomically according to Forbes. Forbes estimates that if you invested $1,000 in Bitcoin when it first launched, it would be worth $41.5 million today.
As Bitcoin and other cryptocurrencies have grown, environmentalists like CWU Biology Professor Dr. Clay Arango have voiced concerns about the impact they could have on the environment.“It’s a lot of energy,” Arango said. “Of course, if that energy is coming from carbon intensive sources like coal, natural gas or petroleum, then you get all those associations with air emissions.”
According to CWU Economics Professor and Sustainability Economist Toni Sipic, cryptocurrency is a non-centralized currency, which means that it is not connected to any one source or entity like national currencies are. Ever since Bitcoin’s creation and its spike in value in 2018, more cryptocurrencies have been showing up.
Sipic said the majority of cryptocurrencies are produced through a process called mining, which is when a computer solves a complex algorithm. Sipic said this process is called “proof of work.”
“So those [crypto] miners back up that value by the capital and the energy that they put in towards making coins,” Sipic said.
Sipic said this “proof of work” process is where the majority of the environmental impact is coming from. According to Sipic, the energy used from crypto mining is equal to the amount of energy Finland uses in a year.
Arango said one of the reasons that the emissions are a concern is because a majority of the power used is produced by coal power plants.
“In terms of air pollution, if we’re talking about the emissions from the coal powered plants, the carbon dioxide put into the air is for all intents and purposes for the human civilization lifespan irreversible,” Arango said.
According to Arango, atmospheric carbon takes 100 – 2,000 years to break down, and the ocean acidification that carbon emissions cause can take 1,000 – 100,000 years to reverse.
Another thing that Sipic noticed is the real estate around the hydroelectric plants have recently been occupied by cryptocurrency miners.
“[The] Columbia River is right here and we have lots of hydroelectric dams and electricity is cheaper and cheaper right next to those dams,” Sipic said. “We had aluminum smelters that were there, and now we have Bitcoin miners as well as data farms for Google and Amazon.”
Sipic compared cryptocurrency to tulips in the Netherlands: the value of cryptocurrency is speculative, which means that instead of being backed up by gold or silver like the U.S. dollar, its worth is determined by how much the people investing in it think people will desire it in the future. The value of cryptocurrency today and the value of tulips in the Netherlands during the 1630s were entirely created based on their demand and the demand that people thought they would have in the future.
“Values are something that humans create in their heads, there’s no such thing as a price lying around,” Sipic said. “Just like back in the day in the Netherlands, the tulips had humongous values that [were] greater value than a whole house. And that’s because humans decided that’s the case, not because that’s the intrinsic value.”
Much like tulips in the Netherlands, Sipic predicted that cryptocurrency will not hold its value forever.
Sipic said that economists argue that cryptocurrency doesn’t have to have a negative impact on the environment because of the new “proof of stake” system that is used in cryptocurrencies such as Etherium.
According to Sipic “proof of stake” gives cryptocurrency value based on the amount held by owners, similar to how the stock market works. Sipic said that while this is better for the environment since it doesn’t require mining, it being based on the amount owned does make it more centralized, since it is a more centralized system he cannot see it becoming more popular than “proof of work.”
By the students, for the students of Central Washington University
Cancel reply
Your email address will not be published. Required fields are marked *
Related Posts
