Environmental Impact of Cryptocurrency: Fact or an Exaggeration

There has been constant conversation on the power consumption of mining Cryptocurrency and its impact on the environment.

It’s believed that the environmental impact of Cryptocurrency is significant. Hence there have been calls for an alternative mining process that reduces the energy consumption.

The environmental impact of Cryptocurrency has divided opinions with some calling Cryptos a climate degrading tool while others see it as nothing but mere exaggeration by environment alarmists.

How Much Energy Does Cryptocurrency Consume?

122.87 Terawatt-hours of electricity annually is the energy consumed by Cryptocurrency according to Cambridge Bitcoin Electricity Consumption Index. This is more than the annual energy consumption of the Netherlands.

2,000 kilowatt-hours of electricity is what a single bitcoin block consumes according to Digiconomist. Ethereum network annual power consumption is placed at 99. Terawatt-hours of electricity which is more than Belgium’s annual energy consumption.

As Crypto users continue to increase it’s expected that the amount of energy consumed will also increase. 

Why Cryptocurrency Consumes So Much Energy

Cryptocurrencies such as Bitcoin and Ethereum use a system called a proof of work (PoW) system. This requires people solving different equations of different levels of difficulty to mine new coins. 

The PoW system is also used to add new blocks of information to a digital currency’s blockchain. The system was designed to intercept and counteract cyberattacks in the situation where there’s an attempt to multiple fake identities.

A major factor for the high energy consumption of Cryptocurrency is the fact that everyone on the network is racing to be the first to solve equations to earn the reward. And the person with the most processing power stands a better chance of winning.

Countries with high Energy capacity and low energy cost are likely to attract crypto mining companies.

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Environmental Impacts of Cryptocurrency Mining

Experts have stated that crypto has a significant impact on the environment. The amount of carbon emission generated by bitcoin mining annually has been compared to that of small countries.

Researchers at the University of Cambridge report that most Bitcoin mining—around 35% in 2021—takes place in the U.S. The U.S. gets most of its electricity by burning fossil fuels. Kazakhstan, another country that gets most of its energy from fossil fuels, follows the U.S. in accounting for 18% of the world’s Bitcoin mining. As a result, two countries heavily dependent on fossil fuels are responsible for the majority of the world’s Bitcoin mining.

The US and Kazakhstan account for the two countries where Cryptocurrencies are mined. Both countries generate most of their energy for fossil fuels which means bitcoin has a huge impact on their environments.

Are There Ways To Reduce Cryptocurrency’s Energy Consumption

The environmental concerns the mining of Cryptocurrency has generated has led to the search for less energy consuming ways of mining Cryptocurrencies.

The proof of state which doesn’t require much energy is fast replacing the proof of work mining methods of validation. Other less energy consuming mining techniques such as proof of history, proof of elapsed time, proof of burn, and proof of capacity, are being developed.

Bitcoin and other Cryptocurrencies have established different initiatives that will transition their mining process from its current energy consuming one to a less energy consuming one. Ethereum has already moved from proof of work to a much less energy consuming mining technique.

The Climate Accord also aims to stop all carbon generating Cryptocurrency mining by 2025. The Cryptocurrency Community believes that making conscious efforts and setting a timeline for the improvement of the Cryptocurrency mining process will increase the faith of stakeholders and the general public.


  • Linda

    Skilled Web3 analyst with a focus on the functional and ethical dimensions of decentralized networks.

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