The Cryptocurrency debate: Is cryptocurrency harming or helping sustainable development?
Cryptocurrencies have caused a lot of buzz in the past few years with some subscribing to the idea of a decentralized currency system, others investing in order to make profit, and some who think the whole operation is a betting game. Whether you are a valiant supporter of Bitcoin and its impact or you are a skeptic of the “scam”, it is hard to ignore that cryptocurrencies have real world implications.
The most traded and popular cryptocurrency is Bitcoin. Bitcoin is a digital replacement for tangible money that needs to be mined. This “mining” of the digital tokens requires computers calculating long equations for the purpose of “proof of work”. Miners help to verify and tie up transactions in the block chain in order for a new block to be stimulated. Every ten minutes, there is a lottery that grants Bitcoins to computers who have proved their work. While Bitcoin mining used to be achievable on a household computer, in recent years Bitcoin mining involves a room filled with specialized machines costing hundreds of dollars. With these computers, the electricity used in mining one Bitcoin amounts to nine years of household electricity. This means that crypto mining rewards people who use a lot of energy. This results in large scale mining facilities with hundreds of computers, all competing for the same Bitcoins and using up energy. The server farms that generate Bitcoins take up as much energy annually as a small country like the Netherlands. Only 39 percent of that energy is renewable, so the remaining 61 percent is fossil fuels which have devastating effects on the environment.
Thus, it is clear that the production of cryptocurrencies, while digital, have real world environmental consequences. However, there is another part to this debate that is also true. Many international organizations such as the UN are turning to the technology behind cryptocurrencies like Bitcoin for environment-saving solutions and progressing sustainable development in lower income countries.
The Blockchain, a byproduct of Bitcoin, is a system that records and tracks everything of value. In Bitcoin, it helps to track and verify transactions. This blockchain technology could be applied to a variety of systems outside of cryptocurrencies. It could eliminate intermediaries in the process of verifying transactions, saving time and money. The blockchain could also make governments and organizations more democratic and transparent as well as track the origins of products and movements. In correspondence with Provenance, a company who has created a public and decentralized blockchain, the commitment to transparency and environment was evident. The VP of marketing Graham Kahr highlighted Provenance's commitment to level the playing field between large and small corporations and banks. He also mentioned a grants program for programs that enhance the ecosystem or enact social change.
These technologies could be applied to sustainable solutions in a number of ways. It could help us make supply chains more transparent. We could track where goods and products come from, helping us to make more ethical and sustainable choices. Making supply chains more transparent could also help to reduce fraud, waste, and unethical practices. For example, we may discover through the transparency of the system that our fair trade products have a large carbon footprint compared to locally grown products. We might also notice unethical practices in one business, and decide to buy from another. We can hold companies accountable for their mistakes or add carbon taxes to goods with large footprints. These ideas are already put to the test in technologies like FOODTRAX.
The main tool of the blockchain would be its transparency and resistance to tampering and fraud. This would be useful in areas with higher reports of corruption or weaker institutions. Blockchain can help get to who needs it most by getting funds directly to beneficiaries. This can be seen in the pilot program in Pakistan of “building blocks”, where the World Food Programme was able to get cash directly to refugees without needing to go through any bank or organization. Projects like BITGIVE and BITHOPE can also help us eliminate the need for middlemen and banks and get money directly to those who need it. This could also affect the lives of many others, including waste pickers, who make a living off of recovering trash. The blockchain could be used to track waste pickups and make sure the right people are paid for their efforts.
The blockchain can also be used to reduce fossil fuel emissions by providing transparent and complete data on polluters to track if companies and countries are fulfilling their promises on cutting back emissions. We could track commitments and carbon credits of both governments as well as nonprofits to hold them accountable if they are straying from their commitments. The blockchain can also create new markets for renewable energy sources, using its decentralized technologies. This could help end our reliance on fossil fuels. A variety of other sustainable solutions have sprung up after the creation of the blockchain. One of them, CarbonX, is a system that turns reduction in greenhouse gas emissions into a cryptocurrency. This would incentivize companies to reduce their footprints and make money in a sustainable way.
In conclusion, Bitcoin and other cryptocurrencies harm the environment with the way in which they are created. However, the blockchain, a byproduct of Bitcoin, can aid many efforts for human rights and environmental solutions. This makes the answer to the question of if cryptocurrency is helping or hurting the environment murky, although it’s not mutually exclusive. It is important to note, however, that the two don’t cancel each other out. Cryptocurrencies must face the climate crisis like all other industries in order to succeed in the future. Coins and companies involved in the process must keep their commitments to making cryptocurrencies more sustainable.