Dirty Money: Can Crypto Curb Its Environmental Impact?

Keith

February 4, 2021

The cryptosphere now commands a global market cap in excess of $1.0T — and likely accounts for nearly half of the world’s “data center” electricity use. Bitcoin miners consume the most, often relying on fossil fuels to generate the bulk of their energy supplies.

As investment firms, tech giants, and the odd Ivy League endowment rush to pour capital on a conflagration, they’ve made crypto’s environmental impact a burning issue.

The Proof of Work Problem

If you’re new to crypto, check out “A Gamer’s Guide to Blockchain and Crypto” to familiarize yourself with the concepts below.

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You probably know that “cryptomining” is a process where a network of connected computers (called “nodes”) race to find the solution to cryptographic algorithms. Bitcoin and many other cryptocurrencies rely on a consensus model called “proof of work” (or “PoW”) to validate blocks and issue new coins. When a member node proposes a solution, the rest of the network must confirm its validity.

In the early days of Bitcoin, proof of work was a useful way to protect the network from malicious attacks — but it was never meant to be a permanent feature.

That’s how Bitcoin racks up its outsized environmental effects. Running a GPU to validate minty-fresh coins takes a lot of juice, and the broad adoption of ASICs (computers dedicated to mining a single cryptocurrency) has only increased that load. Multiply that for every node, and you’ve got one costly redundancy check.

Two Sides to Every Bitcoin

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Journalists have long argued — not without merit — that Bitcoin is unsustainable. Large-scale mining operations burden infrastructures and output carbon to the tune of a mid-sized nation.

People in the know recently concluded that Bitcoin’s energy use has been severely underestimated. Skeptics like Alex de Vries have dedicated ample study to crypto’s mammoth carbon footprint, in hopes that raising awareness might encourage action.

It’s prompted a few scholarly scuffles, replete with critiques of methodology (at most productive) and accusations of “unscientific and unethical” deductions (at most personal).

But the debate manages to raise important questions. Is it useful to measure cost per transaction in fortnights at Average Joe’s? Are monied interests putting a spotlight on the worst offenders? And if Bitcoin’s our ticket to the toxic jungle, is anyone working to mine more responsibly?

Renewable Energy Isn’t Enough

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While some cryptominers have adopted renewable energy sources, contentious interpretations of the data make it hard to tell if it’s helping.

By the latest measures, 76% of all cryptominers incorporate some form of renewables into their supply mix. It’s a heck of a milestone, but the decision is motivated more by economy than ethics. The fact is, miners tend to choose whatever’s plentiful and cheap in their part of the world.

It’s not all bad news, but some say current efforts probably aren’t enough to curb Bitcoin’s dirty output. Although 39% of the total energy consumed by PoW currencies comes from renewable sources, coal and natural gas still make up the bulk of the difference. The breakdown makes it clear that miners have a long way to go.

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Generation mix — the grab-bag of power sources that produce a country’s electricity — is the assailable problem at the heart of any industry’s environmental effect. A whirring GPU doesn’t hurt the planet; the harm starts at the power plant.

There are some promising figures to suggest green energy could make a difference. North American miners produce 63% of their Bitcoin hash power from renewable, predominantly hydroelectric sources, drawing from the continent’s natural gas for most of the other third. But in the Asia-Pacific region — which contributes 77% of the world’s Bitcoin hash power — coal is king.

The Politics of Power

Miners may soon be forced to adapt. Late last year, China’s Yunnan province ordered hydroelectric utilities to stop supplying energy to cryptominers. Now facing a crisis due to an embargo on Australian coal, the CCP is expected to tighten restrictions on Bitcoin mining as part of nationwide energy rations. Earlier this month, Iran found a similar culprit to blame for a spate of rolling blackouts throughout the country.

The call for mining regulation has never been louder. As governments begin to denounce crypto as an untenable burden, recaptured energy may be the only way to keep Bitcoin alive.

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Embracing Waste for Change

In an industry more fearful of FUD than carbon emissions, it’s taken good ol’ profit incentive to drive innovation. When hardware limitations and increasing mining difficulty threaten profits, professional miners reorganize their energy supplies for maximum efficiency.

Dan Held, one of the more outspoken voices on the subject, puts it this way:

“Bitcoin miners are the lowest value bid on electricity anywhere in the world… [They] want really cheap electricity… When you create energy and transmit it down a line, you lose some of that energy. So Bitcoin miners look for these trapped sources of electricity, and they tap into that. [They] don’t impact the energy usage with the rest of the world… [It’s] a really efficient mechanism to take that wasted energy and convert it into something amazing.”

Continued research may soon give waste products a second life, whether that means American gas extractors dabbling in crypto or major Russian energy firms marketing waste gases as mining fuel.

But there’s no direct correlation between cost and environmental impact. Increasing dependence on waste energy might only compound the issue by giving energy producers more ways to pollute.

The Cost of Money

It goes without saying that decisions about crypto’s environmental ethics depend on what you make of its mission. If you believe cryptocurrencies can replace existing financial institutions for the better, you’re more likely to be optimistic about the future.

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Bitcoin believers see a chance to build a democratized financial system in place of one that’s even more wasteful. If they’re right that ATMs consume four times as much energy as Bitcoin mining, isn’t outmoding them worthwhile? Now add the total elimination of brick-and-mortar banks, credit card server farms, and the need to relocate physical assets altogether. A noble ideal, to be sure.

Knocking crypto isn’t the same as supporting the alternative, but it’s also worth noting that the banks lining up against Bitcoin donate heavily to fossil fuel conglomerates. Strange bedfellows for the environmentally inclined.

To proponents, Bitcoin is a battery. They’re storing today’s energy to power tomorrow, affording the world a chance to leverage current resources against other resources down the line (once the world has broken free of the old systems).

Building a Better System

To democratize financial access, you need to remove the old arbiters. In places like Africa, restrictive banking laws leave most people without a meaningful way to engage in commerce. It’s no wonder underserved communities in Kenya and Nigeria have eagerly adopted Bitcoin for daily purchases.

Disenfranchised people have also turned to Bitcoin as a safe haven from uncertain political realities. Across Latin America, stablecoins offer income that’s iron-clad against changing tides. Adoption among businesses and individuals has grown in the Middle East, despite government crackdowns.

Blockchain technology is already being used to redistribute the energy grid as we know it. If crypto architects can counter the more pernicious environmental effects, there’s little reason to doubt it can achieve loftier ambitions.

The Proof of Stake Solution

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A wholesale switch to a “proof of stake” model might herald a cleaner future. In that paradigm, validation priority is given to blockchain parties who are willing to ante up real coins to back up their claims.

This wager removes the need for massive distributed networks of electricity-guzzling peer reviews. If bad actors stand to lose a nice chunk of change for lying, trustworthy results are all but a given. Nodes with longstanding and heftier coin hordes “staked” on the network become trusted sources, making coin generation a breeze — and a breath of fresh air for the planet.

Pioneer coins like Tezos have already proven that crypto can work without PoW’s costly redundancies. The energy debate has now prompted big changes to Ethereum, the logic-enabled technology that powers Salad. In a bid to improve transaction times and diminish their carbon footprint, Ethereum developers have committed to phasing out proof of work completely.

If everything goes well, Ethereum may just become the future’s cleanest coin.

Taking a Stand Today

Retrofitting the second most-traded coin on the market won’t be easy. Because there are multibillions at stake, changes to Ethereum’s protocol aren’t expected for two years or more. It’s a glimmer of hope, but there’s no telling if other coins will follow suit (or if the Flippening will come).

In the meantime, every blockchain business has a responsibility to own their impact. That’s why Salad has been a One Percent for the Planet partner since day one. We believe it’s our responsibility to defray the global effects of blockchain technology. And we’re thankful that our users — the loyal Salad Chefs — feel the same.

Our Global Kitchen

One of our guiding principles at Salad is “Step Up, Not On.” We strive to embellish — and never diminish — the valuable contributions of our peers and our fellow travelers.

It’s our belief that we must accept truthful shortcomings before turning them into strengths. The aspects that can improve should be identified through a lens of what they could be. To build the best version of the future, we’ve got to enable everyone to lay a building block.

Making a meaningful impact on the world means leaving it better than it was. Moving forward, we’ll continue to provide ample ways for our users to contribute to that mission.

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In 2020, the Salad Chefs donated 50,000 hours of processing time to charity organizations around the world. They provided disaster relief in Beirut, supported wildlife conservation, and rallied to save the Australian brush from devastating wildfires. And they offset tons in carbon emissions right from their bedrooms.

Salad is dedicated to nurturing a better internet, and every Salad Chef is a cherished leaf on our tree. The more connected computers, the easier it is to provide affordable, environmentally-conscious alternatives to leading cloud services.

Together, we’re proving that “distributed computing” — what it says on our business cards — can equitably share the energy burden of cryptomining, and encourage individuals to be mindful of their part in healing the planet.