The Environmental Impact of Cryptocurrency

Published Mar 22, 2023 at 6:56 PM
Last updated Jan 5, 2024 at 2:46 PM

The environmental impact of cryptocurrencies has never raised more attention in the community. While opponents argue that crypto harms our surroundings, supporters have a diametrically opposite view.

What's good and what's bad for our environment seems subjective. That's why we are going to discuss the relationship between our nature and cryptocurrency and how to create a sustainable and energy-efficient world around us. Reading our review will also help you to discover the future of crypto and its possible effects on our nature. 

Cryptocurrency and the Environment: Effects

Cryptocurrencies are digital coins used for payment transactions. However, the cryptocurrency effect on environment is real. Firstly, crypto mining is a process that helps the verification of transactions. Miners solve the problems and receive some coins in exchange for it.  The computers they use should have strong processing hardware to run complex equations.   However, using this equipment requires a lot of energy and could become one of the biggest issues in the future.

  • Cryptocurrency and Energy Consumption: The mining process includes the verification and inclusion of new transactions to the chain. The miner receives an award in return. The catch is that cryptocurrencies are hard to mine, which hinders monopolies on the network. The main drawback of mining is huge energy consumption. It is also possible to make a comparison between Bitcoin energy consumption with the consumption of the world's biggest nations. 

Environmental Impact: Energy Consumption

  • Crypto Mining Environmental Impact: The fact is that crypto mining has a great cryptocurrency environmental impact. For example, Bitcoin mining utilizes about 204.5 TWh of electrical energy every year, comparable to the annual consumption of Thailand. As of February 2022, a single BTC transaction used 2,292 kWh, which corresponds to the power required for 79 days by the average US household. By taking a look at the data for 2019, you can compare BTC’s annual electricity consumption to those of the biggest countries in the world.

Environmental Impact: Electricity Consumption

  • Cryptocurrency Carbon Footprint: Bitcoin generates about 114 million metric tons of carbon dioxide each year. You should also be aware that bitcoin mining facilities are in terrains that use coal-based power. The perfect example of this is bitcoin mining, with 35% of it occurring in the U.S., and 18% of BTC mining taking place in Kazakhstan — countries known for fossil fuels. According to recent research, Bitcoin mining has a similar climatic impact as burning gasoline or cattle farming.

Environmental Impact: Carbon Footprint

Why Is Bitcoin Bad for the Environment?

Proof of work is one of the main methods of block validation.  Yet the truth is that not all cryptos emerge from the proof of work protocol, so they don't require the same level of energy for mining. Blockchains require validation, and some validation options provide comparable security levels through alternative verification methods. 

Let’s see more details about existing validation protocols:

Proof of Work

Proof of work is a mechanism that enables participants to authenticate crypto transactions by resolving complex math problems. The first user that solves such equations validates the transaction and receives an amount in crypto. The cycle then begins once again.

Through the mining process, users run programs on their computers while trying to solve the problem. The more power you use, the better your chances are of getting the right to update the chain and claim rewards. This means that miners are encouraged to put in more power during the mining process. 

More and more machines compete to mine Bitcoin. As a result, the process has become even more difficult. One of the newly created machines for this purpose was Application-specific integrated circuit (ASIC) miners.

According to Cambridge research, Bitcoin generates 132.48 terawatt-hours (TWh) every year, which surpasses the annual energy consumption of Norway (123 TWh in 2020).

Proof of Stake

As part of this mechanism, miners utilize the available cryptocurrency to gain access to mining rights according to the number of coins they already have. They lock their crypto to generate a validator node, which helps in the verification. Once a block of information needs approval, the blockchain selects a random validator node. Upon verification, the block is ready to be added to the blockchain. Any attempt to add inaccurate information brings the risk of losing some coins.

Proof of stake mechanism consumes less energy than proof of work and is much more efficient. Some reports say that the proof of stake utilizes about 99% less energy than PoW. Moreover, the required hardware is less specialized and resembles a typical laptop, which keeps the network viable and reduces the amount of electronic waste.

Validation Protocols

Proof of Burn 

Proof of burn is a combination of proof of work and proof of stake. When it comes to proof of burn, validators burn some crypto and remove it from circulation permanently. While completing this process, validators purchase a virtual mining rig that operates proportionally to the number of burned coins. The more tokens you burn, the faster you can mine. As a result, you can mine crypto without significant energy costs. 

This is one of the new concepts in the industry created to tackle the environmental inefficiencies of proof-of-work mining. However, it didn't generate much attention, and Slimcoin is the only crypto using it.

Proof of Capacity

Proof of capacity utilizes the existing storage room on a device's hard drive to validate transactions. All possible solutions to the PoC algorithm are kept in empty space on a mining device. This means that with more storage, you also have more solutions, including a better chance of finding the correct one for the algorithm. You will see this algorithm used by Burst, Chia, and Storj coins.

Impact of Cryptocurrency on Environment: Creating More Environmentally Friendly Process

The environmental impact of cryptocurrency has become a widespread cause for concern. The community has already started to look for greener solutions in order to make crypto mining more sustainable:

  • Restrictions: The ban on cryptocurrencies is one of the feasible solutions to reduce energy consumption. China is a perfect example of a country that banned crypto mining in 2021. As a result, about 50% of miners left the network and China outlawed crypto in September 2021.
  • Greener Energy Resources: The community has made great efforts to quit fossil fuels and energy-unfriendly processes. An ideal example is the American mining procedure that relies on renewable energy resources. With such improvements, new miners have shown their interest. However, results from the survey show that non-renewables still dominate the mining industry.


  • The Rise of “Altcoins” - Environmental Friendly Cryptocurrencies: While Bitcoin was the pioneer in the crypto market, today we have many alternative coins with lower energy consumption. One of them is Solarcoin, which needs one coin per megawatt hour created via solar technology. In addition, Ethereum 2.0 will improve the current energy issues faced by native ETH.


Bitcoin Environmental Impact: The Future 

The efforts made towards greener mining are notable.  When they will actually pay off is only a question of time. Many cryptos are already ready for the transition from proof of work to proof of stake and Ethereum is the first in the line. 

As cryptocurrency will probably stay with us for quite some time, it's important to tackle this issue with much consideration. The first step is creating an energy-friendly mining process that will have an acceptable environmental effect. The use of cleaner solutions and saying goodbye to fossil fuels make sense. All these efforts together will probably save the climate and keep our environment alive.