Crypto is all memes and moonshots until you look at how much power it uses up.
Digital currencies like bitcoin require an energy consumption that rivals that of entire countries. Still, there are solutions out there to clean up the field, according to The Regulatory Review, many of which are already in place.
What is cryptocurrency, and why does it use so much power?
Crypto coins are a type of digital currency that gained popularity for their nontraditional structure and as investments. A big part of their value stems from being traded on a highly secure platform called the blockchain.
However, to get onto the blockchain, a "mining" process must occur, which is what gives crypto its bad energy rap. Each bitcoin that is mined drains a massive amount of electrical power from the grid, and individual transactions require a little energy as well, though generally comparable to other forms of digital transactions.
The overall energy impact is "astronomical" and has increased power bills in some areas by more than 30%, Suffolk University Law School professor Steven Ferrey wrote in a recent paper, per The Regulatory Review.
Why is crypto energy usage important?
Aside from making regular utilities more expensive, the power supply for cryptocurrency also comes largely from polluting sources — although some coins are greener than others.
That reliance on dirty energy means that crypto worsens the planet's trends of rising temperatures and extreme weather events.
Ferrey argues that there is a real structural issue here. His reasoning could fill a textbook, but the basics are that there is not enough clean energy available to handle crypto mining, in part because many regions have shot down clean electricity projects. As a result, the field's environmental impact continues to be an issue.
He calls this reality the "legal dark side" of how cryptocurrency gets its power and said that it will send the United States down the "highway to climate hell."
That said, many governments, organizations, and professional crypto mining companies have made massive strides to shift energy generation for crypto toward cleaner, sustainable energy sources such as hydroelectric and wind power, as well as deals to use energy for crypto only when a region's overall electricity demand is lower. As a result, a recent Cambridge study said that 52.4% of bitcoin's energy needs are now powered by cleaner energy sources, with 42.6% renewable and 9.8% nuclear.
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Investments like this are important, and the path forward may actually see crypto as an ally in the effort to scale up renewable energy.
How regulation can help with crypto's power problem
Advocates for greener cryptocurrency, from experts like Professor Ferrey to groups like Earthjustice, Sierra Club, and the Crypto Climate Accord, all agree: Better interventions in currency mining and energy use is the best path toward a future that is safe and healthy for all.
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Definitely 👍 Ferrey noted that legislating sanctions on crypto has worked in the past, as has incentivizing broad clean energy adoption. He encouraged officials to build more regulations and policies that could protect consumers from rate hikes and even leverage clean energy tax credits to move crypto miners away from polluting energy, The Regulatory Review explained.
Crypto companies can also get the benefits of clean energy directly. One study found that using solar energy for bitcoin mining lowered developers' operating costs, and another found that they could save millions of dollars by making green investments, according to The Regulatory Review.
Editor's note: This article was updated to correct a statement about individual transactions using up a lot of energy, and to add additional context providing a sense of how much of the energy behind bitcoin comes from cleaner energy sources.
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