“Bitcoin: the future of money.” In 2021, Bitcoin was the hot topic. Released in 2008 by a person or group of people under the pseudonym of Satoshi Nakamoto, bitcoin was born out of the distrust for banks and their role in the financial system after the 2008 Great Recession. Ever since, Bitcoin has been advertised as an alternative payment system that would operate free of central control. Popular due to its security with the implementation of blockchain technology and bank-free system, in 2021, Bitcoin’s values skyrocketed and hit a peak of $64,000. Unlike fiat money, Bitcoin is also universal, granting global access to its over 46 million currency owners. However, cut to 2022 and prices have tumbled down to the $30 thousands.
It its rapid downfall, many have begun to explore the ways Bitcoin's benefits have bitten back. For example, despite being universal, extremely secure, and unaffiliated with the government, it is for this exact reason that crypto currency provided a new tunnel under cover from the government for the black market to trade. In 2021, cryptocurrency-based crime hit a new all-time high, receiving $14 billion over the course of the year. However, due to the difficulty of tracking cryptocurrency, estimates of crypto payments linked to financial crime vary wildly from 0.15% to 46% of transaction volumes.
Next to its criminal appeal, cryptocurrency is also volatile. In fact, cryptocurrency can drop 30% in just one day, making cryptocurrency investment a immense risk for users. Unfortunately, those who invest in crypto are often those who are most desperate for money, seeking a lottery-type solution to their financial crises through crypto currency investment. “I didn’t sleep for a couple of days,” says Steve Jenson, a young investor in crypto. With half his savings on the line, Jenson invested in crypto in a vain attempt to make a down payment on a home in Westchester. Jenson reports that he has lost a total of $15,000. Cases of those who invested in LUNA, a cryptocurrency that lost more than 99% of its value, are even more extreme. One investor reported falling from $4.6 million to a mere $500 in a matter of weeks. “I’m not sure if or how I’ll recover. I lost everything.” the former millionaire says. Stories like these drowned out all other news in June of 2022 but now, the environmental issues of cryptocurrency have begun to come into the limelight.
The environmental aspect of cryptocurrency starts from the quietly released whitepaper released in 2008 by Nakamoto detailing a revolutionary system: blockchain. Blockchain is the process in which a record of transactions made in Bitcoin is maintained across the network to prevent fraudulent exchanges. In order to verify one megabyte of transactions, or blocks, Bitcoin mining was created. Bitcoin mining is the process in which miners attempt to verify a block the fastest and most accurate by solving a cryptographic puzzle in return for a sum of Bitcoin. As more computers join the system, the more competitive the mining market gets and the more complex the cryptographic puzzles become. This concept is called proof-of-work and is the main reason why Bitcoin is so secure. However, with this ingenius system trailed unprecedented consequences.
When Bitcoin first started, one’s home desktop was enough to start mining. However, as more people began to cash in on the concept, miners had buy more higher-powered computers. As the value of Bitcoin and the number of users began to exponentially spike, millions of miners popped up around the world, running thousands of computers every day in the fervent race to mine the next block. Miners realized that aside from the sheer quantity of hardware, the quality of the hardware is key to a miner’s success. Miners began to replace their equipment more often, replacing computers around every five yaers in comparison to the average computer user who replaces his or her computer around every eight years. With more miners joining, the resulting e-waste accumulated to horrific amounts. In fact, every year, Bitcoin generated approximately 36 thousand tons of e-waste. This e-waste is not only extremely difficult to properly dispose of but also contains toxic chemicals that inevitably leach into soil and groundwater, putting people and wildlife at risk.
Beyond e-waste, through their constant computer running, Bitcoin miners created about 73 million tons of carbon dioxide every year. In other words, Bitcoin mining used more electricity than all of Argentina’s annual energy. However, the electricity bill for mining companies is not solely from the direct powering of the computers. With so much constant processing, the computers also generate egregious amounts of heat. This heat has a negative impact on the computer’s running life and efficiency, so to cool the computers down, Bitcoin miners spend the majority of their electricity bill not powering the computers but rather to cooling them down. Massive fans are active at all times especially during the summer seasons to protect the computers.
To combat these issues, miners have attempted to come up with creative solutions. In 2021, crypto mining company BitCluster set up a station in Norilsk, Russia. Not only is electricity much cheaper and sourced from hydropower and natural gas in Norilsk, but the cold climate has helped to cool down the hundreds of computers. Another Bitcoin mining company called Genesis set up sheds with shelves of computers in Reykjavik, Iceland with similar intent. However, it is places like Norilsk and Reykjavik that are often the most economically unstable, have the weakest regulations, and are already the most environmentally unstable. For instance, Norilsk has a long history of nickel production. This smelting and mining for nickel release sulfur and toxic pollutants into the air. Lung cancer and other diseases rates are high and acres of forest have died from the contaminated ground and air. As for Reykjavik, Iceland suffers from periodic volcanic eruptions and a boom and bust economy. These volatile environmental conditions have already made it difficult for Iceland fishers, a situation a Bitcoin mining center only worsens.
Other miners have turned to the ocean for solutions. Project Natick, led by Microsoft, is an underwater data center that aims to leverage the cooling power of the ocean to save energy and to create a stable environment for computers to run. From a distance, Natick appears as a large metal tube being dunked in the ocean, but when opened, one will find 864 computers running on 12 racks. After being dunked for 105 days, Project Natick reported promising results, with failure rates one-eighth of what is usually seen on land. However, despite the results, there was a slight rise in the lakes water temperature. While was almost undetectable for a single underwater data center, with global warming already heating up oceans, it remains a question as to whether Project Natick is truly scalable. Expanding Project Natick could potentially result in a more profound impact on already volatile ocean temperatures.
Society has weaned off of its dependency on cryptocurrencies, but the debate continues. While some countries like Mexico have turned to cryptocurrencies as a legal tender, other countries like China have banned cryptocurrency and mining altogether. Though crypto advocates have explored ways more environmentally friendly methods of mining and attempted to cover the persistent underlying dark aspects of cryptocurrency, a true solution has yet to emerge. Perhaps it is time to stop waiting for a solution and to start questioning whether crypto really is the future of money.