The U.S. Senate Banking Subcommittee met on Wednesday to discuss the dangers of cryptocurrency. The meeting follows ransomware attacks on the Colonial Pipeline and the JBS meat processing company within the last few weeks. Both companies paid their attackers in Bitcoin.
But another danger of the growing cryptocurrency marketplace was identified: the environment.
“Bitcoin consumes more energy than entire countries. And it is projected to consume as much energy as all the data centers in the whole world this year,” said Massachusetts Senator Elizabeth Warren. She serves as the committee’s chair.
Just one Bitcoin transaction uses as much power as an average American household consumes in an entire month. That’s according to the website Digiconomist.
As Bitcoin, Dogecoin, and Ethereum get more attention from celebrities dabbling in the market, more people want in. That can spell higher energy consumption, which leads to more carbon emissions at a time when the world desperately needs to cut them.
“The way cryptocurrency is mined and the way these transactions are recorded in the blockchain — that is let’s say Bitcoin involves basically using a lot of computing power, a lot of people are competing using a lot of computing power to record the transaction. And that is what is using all the energy,” says New Yorker staff writer Elizabeth Kolbert.
Unlike the early days of cryptocurrency, many people are mining virtual transactions via big server farms, multiple computers and artificial intelligence.
“No one knows who created Bitcoin. No one knows who created the whole mechanism by which it gets created. But you can infer that the idea was to have a kind of equal playing field. But as is so often the case with some things, people sort of figured out, well, consolidation was more efficient. And if you have these big mining farms, your chances of success go way up.”
Kolbert points out that Bitcoin mining can create lots of carbon emissions if the energy is generated by burning fossil fuels, and companies rather than individuals are doing the mining.
However, some communities are turning to energy alternatives to mitigate the climate impacts of cryptocurrency transactions. For example, Kolbert says, some regions in China are using hydroelectric power to generate electricity. A repurposed power plant that burns natural gas in upstate New York is also being used to mine Bitcoin.
“That has become quite controversial in the area where the plant is located. Because there’s a question of: Why should we basically be firing up these plants, some of which were either on the verge of retirement or only used very intermittently as what are called peaking plants, that only operate when there’s very high power demand?” Kolbert says. “We’re firing them up again to mine Bitcoin. That seems kind of insane at a point in time where we really, really need to be cutting our carbon emissions.”
She notes that even if sustainable energy sources are found to support Bitcoin mining, the new methods won’t be sustainable.
“You do have to realize that anything that’s using a tremendous amount of energy and putting that burden on the grid is using energy that could be used for other purposes. So at a certain point, there is a finite amount of energy that we’re going to get out of the system. And what do we want to be using it for?” Kolbert says. “Even if you’re just hooked up, as it were, to a solar panel, you’re not putting that energy into the grid. So you are burdening the grid with this activity.”