A new report by the White House Office of Science and Technology Policy (OSTP) draws attention to the threat that crypto mining poses to the environment, specifically with regard to the massive amounts of energy required in the whole process.
One aspect of the broader cryptocurrency dialogue that tends to get lost among more salacious talking points would be the environmental toll of extracting digital currencies. According to the report, total global electricity usage for crypto-assets has exceeded the annual electricity usage for countries like Australia and Argentina as of August 2022.
Back in March, Joe Biden signed off on an executive order that aimed to explore the connection between cryptocurrency production and climate change mitigation efforts. The resulting research is supposed to offer a framework for how the U.S. should proceed to regulate digital assets, at least when it comes to the demands on the country’s electrical grid system.
Panning for Bitcoin — Not all cryptocurrencies are valued equally, and accordingly, the allocation of industrial mining equipment focuses on the production of high-value assets like Bitcoin. In total, energy used to mine Bitcoin is “estimated to account for 60 to 77 percent” of the “total global crypto-asset electricity usage.”
Texas has become a hub for miners, with the strain on the state’s power grid hitting a peak record for energy usage as recently as July. Bitcoin mining companies even halted activity during this period, in order to avoid the threat of blackouts. It is worth mentioning that these companies are paid just to cease operations, which offers yet another incentive for more miners to transfer their business to the lone star state.
As of this past August, the U.S. has become the de facto home for the Bitcoin industry, “accounting for around 38 percent of the global Bitcoin network hashrate.” In other words, close to 40 percent of the energy expended to generate Bitcoin takes place in America, something that the Biden administration will have to contend with moving forward.
Ethereum is another high-value digital asset that is “estimated to account for 20 to 39 percent of the total global crypto-asset electricity usage.” The existing system meant to authenticate crypto transactions during mining is known as proof-of-work (PoW). It’s the same system Bitcoin uses to authenticate its own transactions.
However, Ethereum miners will be migrating over to a more energy-efficient system known as proof-of-stake (PoS) in order to alleviate energy usage by 99.95 percent sometime this month, a process that has been in the works since the summer.
The process to create new Ethereum and Bitcoin tokens involves the use of powerful computers to solve complex math equations in order to add transaction ledgers to each blockchain. Companies compete to solve these problems and the winners are rewarded with new coins.