Could our obsession with cryptocurrency be destroying the environment? Here are 5 ways to fix the problem before it’s too late.

BIT COMPLICATED

Behind an ideological vision for good, there can be unforeseen consequences that could not be predicted or imagined until years down the line. This is why I’ve dedicated the past five years to studying these “Dot Complicated” tech innovations. No tech is purely good or purely bad. Which is why I’m both fascinated, excited, and also a bit appalled by the latest trend on everyone’s lips: Cryptocurrency and particularly, Bitcoin.

I’ve had Uber drivers ask me if I think they should buy bitcoin. On a recent flight I saw at least a dozen people checking their Coinbase accounts. My husband and I debated if we should give our son his latest tooth fairy allotment in cash or Ethereum. The frenzy is everywhere.

On the surface there are the immediate pros and cons of cryptocurrency.

Pros: It’s a decentralized currency that takes power away from governments and banks, it democratizes cross-border payments, it prevents against hyper-inflation and economic crises that affects a particular region of the world, and it gives those without access to banks or banking accounts a way to send money to loved ones.

Cons: Cryptocurrency is unregulated, lacking any laws or protection we currently have regarding fraud or theft, it enables payments to be used for nefarious purposes more easily, it opens up potential for hacking. And, perhaps the most dire con of them all is something we’r not talking about nearly enough: The potential devastating impact of cryptocurrency and blockchain technology on our environment.

How could a purely digital currency and ledger system have any kind of measurable impact on the environment?

To understand the environmental crisis we could be headed for requires a basic knowledge of how cryptocurrency and the blockchain works. Wired magazine has a thorough Bitcoin 101 if you need a refresher. Basically the crux of what we’re discussing here is how Bitcoin mining takes a LOT of computing power and computing power requires energy. As more and more people want to get in on cryptocurrency, more transactions are being processed which means an influx of computers signing on to be part of the blockchain, and math problems that get harder and harder, and require even more energy consumption. So for each incremental token mined, more and more energy is guzzled.

THE ENERGY RUSH

Let’s break it down: If you looked at every single Visa card transaction for a year, processing those billions of transactions would be equivalent to the energy use of about 50,000 households. Let’s look at Bitcoin usage. Bitcoin has a tiny fraction of the annual transactions Visa has, but the energy usage is off the charts. Each Bitcoin transaction consumes 4,000 times the energy of a single credit card transaction. Bitcoin transactions last year were equivalent to the energy usage of millions of households. And in just December 2017 alone, the total electricity usage in Bitcoin mining, increased by 30%. If we looked at Bitcoin as a country, it would be somewhere around Bulgaria’s energy use (a statistic which may have changed even since writing this article). Considering that the entire global market cap of all of Bitcoin is only one third the size of the market cap of Apple (one company!) that’s pretty scary when you think of the insane growth explosion we could be headed for with cryptocurrencies this year.

Now let’s add this on to that the fact that a huge percentage of Bitcoin is mined in parts of the world that are predominantly powered by coal, or nations that don’t have the same regulations around environmental protections and clean energy. A huge percentage of current mining is done in China and in rural parts of countries that don’t even have access to clean energy to begin with. This article documents going inside a Bitcoin mining operation in Mongolia and found the energy demands of a single mine were equivalent to the carbon footprint of a Boeing 747 repeatedly flying around the world.

And this is only Bitcoin but the entire token market and cryptocurrency space is growing like crazy. There are now more than a thousand different types of cryptocurrency —  even “EnergyCoins” are on the rise to help sidestep the Bitcoin energy factor. Millions of new opportunities are being created in terms of mining, blockchain — you name it.  At the start of 2017, there were 11 hedge funds focused on cryptocurrency. One year later, there are more than 100 hedge funds and venture capital funds dedicated to cryptocurrency. Which means that in 2018, we are going to see hundreds of millions, if not billions, of dollars from these funds poured into this space, resulting in an explosion of new cryptocurrencies and startups dedicated to blockchain technology. (Ironically, many of these same investors are the ones driving battery-powered Teslas and drinking out of reusable water bottles!). Every single major financial institution, government, and tech company is investigating cryptocurrency and how to participate. Even Amazon is rumored to be thinking about cryptocurrency for their marketplace.

This trend isn’t ending anytime soon. The chum has been dumped into the water. The sharks are rushing in. And our energy use is going to get a whole lot worse before it gets better.

RIGHTING THE WRONG

Some might argue that the market will correct some of this on its own. As the demand for increased computer processing increases, suppliers will begin charging more, countries will wise up to rising energy costs and will, in turn, make people think twice about the cost+benefit analysis of mining. However, it’s very easy for miners to “chase the energy” and just keep moving around the globe to follow cheaper, dirty energy sources. Rising costs of energy and equipment will also have an adverse impact for small startups, nonprofits, and organizations who have nothing to do with the current cryptocurrency and blockchain craze.

I spoke with a few environmentalists in researching this article. They agreed that this was something worth following closely, but one acknowledged that since Bitcoin only currently accounts for about .1% of the world’s energy consumption, and since there is a constant stream of environmental thrash coming from Washington D.C., most mainstream environmentalists are so focused on what is emerging from the current political administration they don’t have the time or energy to focus on Bitcoin.

Environmentalist and CEO & Co-Founder of Blueprint Power, Robyn Beavers, spoke about the potential opportunity for entrepreneurs in the cryptocurrency space to match localized distributed clean energy with distributed computing. “As with everything energy related, regulation and long-term investment can often shift energy economics. This means that miners will constantly be hunting for the cheapest electricity. My guess is that Bitcoin mining will actually chase electricity markets around the world."

Robyn pointed me to a few great articles on the topic, such as solar-powered Bitcoin mining and how coal is fueling Bitcoin’s rise. As for that EnergyCoin I mentioned? She told me about a slough of new energy ICOs and energy cryptocurrencies, which seemed exciting, but also a bit ironic.

SUPPLY & DEMAND

I know there was a lot of this same kind of talk around the boom of data centers 10 to 15 years ago, but that feels different to me. Data centers are created and operated by tax-paying companies beholden to shareholders, investors, customers, and governments. With a blockchain economy anybody can participate in the cryptocurrency ecosystem. That’s part of what’s so great about it! Yet, at the same time, it’s also what makes it so complicated.

Don’t get me wrong, I’m just as excited about cryptocurrency as the next woman (well, not quite, considering that less than 6% of all cryptocurrency is owned by women). I have been following this space for a while and am very interested in potential uses of blockchain for things like voter registration, health records, and file sharing. But I’m also terrified that we’re on the verge of an explosive, disruptive new tech frontier in which nobody feels beholden to anyone — not to governments, not to mother nature, not to future generations and especially not to one one another.

With everything we know about the current fragility of our environment, I’m fearful that we’re on the wrong side of history here. That in our desire to be part of the next hot thing or to make a quick buck, we’ve blindly jumped in, thinking we’re leaping forwards, only to realize that we’ve taken a huge leap backwards in breaking our dependence on fossil fuels. I worry we’re not leaving the world a better place than we found it.

WHAT CAN BE DONE?

I have a few ideas:

1) Tax incentives for clean mining of cryptocurrency. While I know the entire purpose of cryptocurrency is that it’s not tied to a central bank or government, we’re all still tax-paying citizens in the countries we live in and governments can still play a role in incentivizing good behavior by providing tax breaks for cryptocurrencies obtained in more eco-friendly ways. For example, Vienna-based HyrdroMiner uses renewable energy for Bitcoin mining.

2) Entrepreneurs in the cryptocurrency and blockchain space should be thinking about innovative ways to make this emerging industry more energy efficient. New distributed networks can lead to new distributed energy solutions. This is a real opportunity for some important and out-of-the-box thinking. Such as the solar-powered Bitcoin mining mentioned previously.

3) Investors in hedge funds and venture funds dedicated to cryptocurrency and blockchain technology need to demand that those funds offset their potentially immense carbon footprint of pumping millions and millions of dollars into this wild west economy by paying a carbon tax/purchasing carbon offsets. Demand to see these carbon offsets before investing and hold those investors accountable.

4) Before you click BUY on that order of Litecoin or Ripple or countless others, before you say “I should mine bitcoin with my children” or “I should invest in this new crypto-fund,” make sure you are a conscious consumer and that how you invest your money reflects your personal values.

5) Get informed. This one is the most simple, but perhaps the most important. You can’t help change the rules if you don’t understand the game. This is especially true for women who are vastly underrepresented in the cryptocurrency space. Ladies, you have tremendous purchasing power: Make sure you understand enough to have a voice at the table. The world may depend on it.

But then, of course, this could all be one giant Bitfad and disappear as quickly as the internet currency before it. I’m looking at you, Beenz.