Is Cryptocurrency Bad for the Environment?

✔ Cryptocurrencies emit 129 million tonnes of CO2 per year – more than Qatar

✔ They use more electricity than Egypt, a country of 102 million people

✔ Bitcoin is responsible for 65% of all cryptocurrencies’ carbon emissions

The cryptocurrency market is enormous.

The top 10 cryptocurrencies are worth more than £1.5 trillion. Bitcoin alone is worth £0.9 trillion, the same as the next 55 companies combined.

But it’s not just Bitcoin. There are more than 6,500 cryptocurrencies in existence, and 1,700 of those are each worth over £1 million.

In theory, these companies provide digital currencies designed to avoid government interference, while also providing an investment opportunity for individuals and companies around the world.

In actuality, they are country-sized consumers of electricity that’s often sourced from heavily polluting fossil fuels.

We’ve investigated their impact on the climate, and identified the biggest offenders.

How bad is cryptocurrency for the environment?

Very bad. The biggest cryptocurrencies emit a combined 129 million tonnes of CO2 per year – more than Belgium, Qatar, or Chile.

This total is practically equal to that of Nigeria, a country of 206 million people – and to state the obvious, cryptocurrencies aren’t countries.

They don’t provide crucial services to millions; they simply use massive amounts of mostly fossil fuel-powered electricity to make a small number of people wealthier.

This gigantic carbon footprint comes from cryptocurrencies’ electricity usage. Together, the top seven cryptocurrencies consume 195 TWh (terawatt-hours) per year – more than Thailand, Poland, or Egypt.

Put another way, these cryptocurrencies use 65% of the amount of electricity that the UK uses annually.

The four cryptocurrencies that consume more than 1 TWh per year are Bitcoin, Ethereum, Dogecoin, and LiteCoin – but the first two are the main contributors by a huge distance.

Bitcoin uses 103.8 TWh of electricity per year, according to Cambridge University’s Bitcoin Electricity Consumption Index.

That’s more than the Philippines, Chile, and even Pakistan – which contains 221 million people – as well as Amazon, Apple, Facebook, Google, and Microsoft combined.

China and Iran both banned Bitcoin in 2021 because its energy usage was crippling their nationwide electricity supplies. A company shouldn’t be able to do that.

Ethereum uses 79.17 TWh, according to Digiconomist, which is more than Morocco, Greece, or Austria.

If they were countries, Bitcoin would come 34th in terms of electricity consumption, and Ethereum would come 39th.

Together, they rank 23rd – and of course, they’re not a country and have no right to act like one.

Why is cryptocurrency bad for the environment?

There are two main reasons why cryptocurrency’s ridiculous overuse of electricity is negatively impacting the planet.

The first is that most of the energy it requires comes from fossil fuels.

The second is that it doesn’t contribute to the overall wellbeing of humanity, and therefore is a sizable drain on our resources and ability to fight climate change – for no good reason.

Let’s go into more detail.

The source is bad

Electricity consumption isn’t necessarily bad for the planet, as long as the power comes from renewable sources.

The problem is that the cheapest energy is often attainable in countries that don’t produce green energy – and that’s often where cryptocurrency miners end up.

For instance, Canada, Kazakhstan, Russia, and the US are the countries where the most Bitcoin energy usage currently takes place.

How renewable is the electricity in these countries? Well, let’s see.

Apart from Canada, that’s pretty bad.

For context, the UK generated 42.9% of its electricity through renewable sources in 2020, according to government data.

And then you have Russia and Kazakhstan – which both rely heavily on coal – and the US, which uses gas and coal to produce 59.6% of its electricity.

The majority of Ethereum is mined in the US, Germany, and China, none of which produce most of their electricity from renewable sources.

China gets 24.4% of its electricity from green sources, while Germany’s figure is a more reasonable 46.2% – though that may be inflated by miners whose IP addresses are redirected to appear like they’re in Germany, and who happen to use renewable energy.

The reason is bad

Cryptocurrencies require a tremendous amount of electricity to power the accumulation of wealth that can come from this half-currency, half-commodity.

But of course, many activities on this Earth consume a great deal of energy.

In May 2021, Changpeng Zhao, CEO of cryptocurrency Binance, made this point while hitting out at Tesla CEO Elon Musk after he backtracked on Tesla accepting Bitcoin as payment (Musk u-turned again in July).

Zhao tweeted: “When you use electricity to run cars, it’s environmentally friendly. When you use electricity to run the most efficient financial networks in the world, it’s an environmental concern. 😂🤷🤷‍♀️”

But there’s a self-evident point to electric-powered cars, heating systems, and medical equipment. They fulfil necessary, and at times life-saving requirements.

Cryptocurrencies, on the other hand, haven’t even proven themselves as an alternative to traditional money.

Without that step, they’re just commodities to be traded – at an enormous loss to the planet.

Let’s take Thailand as an example. The 70 million people who live in the country use 185.85 TWh (terawatt hours) per year to power their lives.

As we all do, they need that power to keep warm, heat their food, and generally live a modern life.

On the other hand, cryptocurrencies use 194.98 TWh per year – and seemingly add nothing to the greater good.

Is there a more environmentally friendly alternative?

Some cryptocurrencies aren’t as bad for the planet because they rely on a Proof of Stake (PoS) system to validate transactions, which consumes much less power than the Proof of Work (PoW) system Bitcoin uses.

The PoS mechanism hands over validating power to those who own a significant proportion of the cryptocurrency – a stake in the company, if you will.

In contrast, the PoW mechanism only allows users to validate transactions if they own a large enough percentage of the network’s computational power – which encourages users to use more energy to gain a greater say in the community.

Popular cryptocurrencies using the less environmentally harmful PoS system include Binance Coin, Cardano, Polkadot, and Solana.

In May, Ethereum once again said it’s working on switching to a Proof of Stake system that will reduce its consumption by 99.95%, which is encouraging – but we’ll believe it when we see it.

For now, Ethereum still uses more electricity than Denmark and New Zealand combined – though it should be said that the most popular cryptocurrency, Bitcoin, has made precisely zero moves towards a less harmful model.

Which cryptocurrency has the largest carbon footprint?

Bitcoin has the biggest carbon footprint, by far.

The cryptocurrency behemoth is responsible for 83.72 million tonnes of CO2, which is more than two times as much as the second-worst offender, Ethereum.

And Ethereum is at least attempting to make steps to massively reduce its 37.61 million tonne footprint, whereas Bitcoin has remained unapologetic and steadfast in its highly polluting methods.

The third-highest polluting company is Dogecoin – a funny meme which has been transformed into an entity with a bigger carbon footprint than Uruguay.

Which country mines the most cryptocurrency?

The US mines the most cryptocurrency of any country.

35.4% of Bitcoin mining is hosted in the US, along with around 35% of Ethereum mining.

Overall, that means US crypto miners are responsible for the emission of at least 42.8 million tonnes of CO2 per year.

That’s 41% more than London produces each year. It’s more than the carbon footprints of Ireland, Switzerland, or Ecuador.

And that’s assuming that the US’s electricity produces an average amount of carbon emissions – which is being generous, considering the US’s renewable electricity usage is proportionally four times lower than Canada’s.

The US’s status as the most popular destination for crypto miners began when China – which previously had an iron grip on the top spot – cracked down hard on the practice.

Over several months in 2021, China moved to make cryptocurrencies illegal in the country, finally announcing in September that all crypto mining and transactions were banned.

This represented a massive shift for China, which in February 2020 hosted 73% of the world’s Bitcoin energy usage, and was still responsible for 52% in February 2021.

China took this action because mining activities were placing a strain on the nation’s already stretched energy supplies.