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Why Bitcoin’s Environmental Impact Is So Hard To Solve

When it comes to cryptocurrency, Bitcoin remains the first, most popular, and most expensive of them all. Since it was launched by the elusive Satoshi Nakamoto in 2009, it’s become a viable investment, a way to pay for goods and services, and even legal tender by countries like El Salvador.

It’s also inspired the growth of other cryptocurrencies and the further development of the blockchain, a decentralized technology that currently has multiple use cases in everything from business and healthcare to art. Though all these things may make Bitcoin seem like one of the next big technological innovations, it has one major downside: a huge environmental impact.

In our post ‘What is Bitcoin Mining?’, we explained how Bitcoin has a finite supply that can be unlocked through an act known as crypto mining. This involves using tons of computing power to solve complex math problems and unlock more Bitcoin. The problem is that crypto mining requires the use of high-powered computers with tons of processing power, and these computers tend to be power-hungry. As a result, Reuters reports that Bitcoin emits around 22 to 22.9 million metric tons of carbon dioxide each year — the same as countries the size of Jordan and Sri Lanka.

Yet in the 13 years since its launch, Bitcoin still hasn’t come up with a solution that would improve its sustainability. In part, this is because it’s a problem that’s difficult to solve. Here’s why.

The Root of the Problem

The environmental issues stem from the way the system works. Wealthsimple outlines how Bitcoin is the closest thing to digital cash we have — and, given the decentralized nature of the distributed ledger known as the blockchain, the Bitcoin community needs a way to verify all the records it contains.

It does so through a consensus protocol known as proof-of-work (PoW). This cryptographic mechanism has miners prove to their peers that they spent a specific amount of computing power to mine a block of Bitcoin and generate a long string of numbers known as a hash.

The SHA-256 hashing algorithm which is used to do so ensures that every hash is unique, which is why they’re used to prevent tampering and validate each block mined on the Bitcoin blockchain. However, this means that PoW only drives the use of large amounts of power by making it necessary for acquiring new Bitcoin.

Nakamoto designed Bitcoin blocks to be mined every 10 minutes — and since the math problems needed to mine Bitcoins become more complex with each block that’s mined, the computers used for crypto mining need to use increasingly larger amounts of power. Ultimately, this means Bitcoin’s PoW system is behind its ever-increasing carbon footprint.

Why Effective Solutions Are Scarce

There are a couple of reasons why effective and long-lasting solutions to Bitcoin’s environmental impact are difficult to create and implement. The first is a refusal to acknowledge the issue. Diehard advocates of Bitcoin — like crypto mining company Luxor Tech — are among those who insist that Bitcoin’s energy consumption still only takes up a small portion of total global usage.

One most commonly-cited argument is that the world consumes more electricity powering Christmas lights than they do mining Bitcoin. Another reason for the scarcity of effective solutions is that we don’t currently have the tools needed to measure the success of current initiatives to see if they’re making a long-term impact.

For example, some miners try to lessen their dependence on fossil fuels by getting their electricity from renewable sources or from natural gas that would have otherwise been disposed of through “flaring” or burning. Governments have been trying to regulate crypto mining as well. China famously banned the activity last year amid power deficits, as did Kosovo and Kazakhstan.

Even Tesla has stopped accepting Bitcoin as payment, and Elon Musk announced that they would only do so again if Bitcoin becomes more sustainable. However, those from countries that banned crypto mining have instead relocated to other countries, which has made it difficult to determine where exactly mining is being done and what power is being used. This ultimately makes the success of the above measures unclear.

Other Cryptocurrencies Stepping up to the Plate

Ultimately, the most measurable change will have to come from within the Bitcoin system itself. The PoW system itself is arguably what makes Bitcoin unsustainable, and it’s consequently what needs to be changed the most. In fact, many other cryptocurrencies have moved away from PoW and today use other validation protocols instead.

The most popular alternative is the proof-of-stake (PoS) system, which is used by cryptocurrencies like “the green blockchain”, Cardano — and, soon, as reported by Technology Review, Ethereum 2.0. Unlike PoW, PoS randomly selects validators depending on the amount of cryptocurrency they hold on a particular blockchain. This helps completely eliminate the role of computing power in the validation process.

Meanwhile, Solana — a relatively new cryptocurrency launched in 2019 — is taking a totally different tack with its proof-of-history (PoH) model. This creates and uses a historical record to prove that a specific transaction occurred at a given date and time.

Instead of having users of the blockchain act as validators, it uses a sequential-hashing verifiable delay function to encode the passage of time and update its historical record as transactions happen. This resolves the issue of transactions made in different time zones.

It also creates a structure that works faster than Bitcoin’s: blocks mined on the Bitcoin blockchain have to wait for confirmation across the entire network before being validated. Consequently, innovations like PoS and PoH prove that the PoW model — and, in turn, a massive environmental impact — is not the end-all-be-all of blockchain validation protocols.

Though Bitcoin has positively transformed many aspects of our lives, we can’t fully benefit from the advantages it offers if it continues to play a significant role in the degradation of our planet’s health. Fortunately, the world’s smartest minds are working toward a solution, and all Bitcoin needs to do is heed their advancements and adapt them into its own system.