Cryptocurrency is a digital form of money based in an encrypted (coded) data string stored across a distributed network of many computers. The distributed data string, or distributed ledger, is known as “blockchain”. The blockchain is a complete record of all buying and selling transactions performed on the currency, linked together into one single "chain" of data. Because it is encrypted and stored on a distributed peer-to-peer (i.e. no central, coordinating computer) network—two powerful layers of security—it is extremely difficult to steal or double-sell. Theoretically, cryptocurrency offers a secure form of money independent of government interference.
Properties of blockchain.
Number of publicly available cryptocurrencies, 2013-2021.
Blockchain was created in 2008 by Satoshi Nakamoto (a pseudonym: his or her identity is still unknown) as the ledger for Bitcoin, the first cryptocurrency, which was released in 2009. Blockchain--the encrypted ledger—was created specifically to prevent double sales of currency without requiring a central computer. Every transaction is added as a data unit to the existing blockchain, making it ever longer. To access your personal transactions, you need the encryption key. Without that key, you lose access to your segments of the blockchain, and therefore, to any currency you own there. Suffice to say your encryption key is absolutely critical to using cryptocurrency!
Number of transactions performed on select cryptocurrencies.
Recent price volatility of select cryptocurrencies.
Central to the concept of cryptocurrency, and the root of its climate impact, is “mining”. Crypto users employ their computers (nodes) to work on the blockchain, timestamping and “validating” existing transactions. The users receive payment in cryptocurrency for the transaction validations which their computers do. As the number of users has increased, the task of validating transactions has become more complex, and the rewards (fees) per validation have declined.
Market share of major cryptocurrencies.
As the fees for block validations have decreased, the number of users has increased and the energy consumption of cryptocurrencies has grown dramatically worldwide, surpassing the aggregate electricity demand of many countries. Because of the distributed, unregulated nature of cryptocurrencies, estimates of energy consumption vary widely. Generally speaking, there is much more uncertainty toward the high side of crypto-related energy estimates. This is because, as cryptocurrencies gain value (the theoretical value of the currency is not the same as the transaction fee), many smaller users with less efficient nodes begin mining, using much more energy. It is notable that none of the US’ recent “game changing” climate laws (the most recent, as of writing, still an unpassed bill) address cryptocurrencies.
Estimated energy consumption (2016-2021) of Bitcoin mining, along with electricity consumption of select countries (2021).
2019 electricity consumption.
Estimates of crypto-related CO2 emissions are dire. One study estimated that 2020 emissions related to Bitcoin were 25.2 MtCO2 (megatons of CO2), the equivalent of 2.6-2.7 billion average homes around the world. Another study estimates that cryptomining in China alone could create 143 MtCO2 emissions by 2024. The entirely decentralized nature of cryptocurrencies—a deliberate feature of their design—makes remediation of this energy consumption problem difficult. It also highlights the immediate need to increase our renewable energy capacity. As of now there is no globally coordinated effort to regulate cryptocurrency, meaning the problem is unlikely to change.
Tomorrow: EXXON’s climate fraud.
Be brave, be steadfast, and be well.
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