No, cryptocurrency isnātĀ going to exacerbate climate change.
A few months ago we quietly started accepting cryptocurrency for payments at our meditation school.Ā When our first student signed up and paid using dogecoin š¤£ it was immediately clear that this is the future. The transfer was instantaneous, it required no middlemen, the fees were minimal, and most importantly it made us laugh that we were being paid with a currency named after a cute, dog-meme. Ā Weāve expanded the currencies we accept to include Bitcoin, dogecoin, Ethereum, Monero, BNB, and Zcash. Weāre also incentivizing people to pay with crypto by giving an automatic 25% discount to anyone who pays with crypto.Ā
I believe that over time, cryptocurrencies will replace credit cards and cash for most transactions. Even at this early stage, I can run software on my own computer that can replace 90% of the functions of the banking and finance industries. It feels amazing to be a part of this revolution. I think weāre just at the beginning of something huge. I started playing with cryptocurrencies in 2015 and Iāve never been more optimistic about its future than I am today.
But what about the environment?
If you know me, then you know Iām an environmentalist. I care deeply about preserving natural ecosystems and ensuring a sustainable future for humans, and all beings on our shared planet. There have been a lot of headlines about the terrible impact of bitcoin on global climate. One thing is true, bitcoin miners use a lot of energy to power their rigs. When I started reading aboutĀ bitcoinās environmental impact I almost gave up on it. Thankfully, when I went to high school, I learned how to do basic mathematics. Unfortunately this doesn't seem to be true for the journalists whoāve written about bitcoin. Letās compare the energy use of bitcoin to the energy used by traditional banking. If you donāt like math, skip a few of paragraphs to the conclusion. If you love math, please check my numbers and make sure Iām correct.
First round.... Bitcoin!Ā
According to miner daily, a bitcoin-mining news site, bitcoin mining currently uses approximately 128 gigawatt hours per day, worldwide. This is a huge amount of energy and if you look at it without context, itās understandable why eco-conscious people are concerned. But context is crucial, so letās compare bitcoin with the systems itās replacing.Ā
Second round...US Bank branches!
According to the world bank there were 62,350 bank branches in the USA in 2017. The energy star websiteĀ surveyed 26,465 of these banks and found that the median, yearly, energy use of a bank branch in the USA is 266 kBTU/square foot with a total of 174 million square feet of properties included in the survey. Assuming that this is a representative sample of banks we can now do the math.
174 million sq ft / 26,465 gives us 6,575 sq ft. The average square footage of a US bank branch.
Multiply 6,575 sq ft with 62,350 to get 409,951,250 sq ft. An estimate of the combined square footage of allĀ bank branches in the USA.
Multiply 409,951,250 sq ft by 266 kBtu/sq ft to get a staggering 109,047,032,500 kBtu. The yearly energy use of all US bank branches.
1 kBtu is equal to 0.0000002930711 GWh so lets do the conversion and divide by 365 to get a daily number.Ā
The combined, daily, energy-use of all US bank branches is 88 GWh. To put this into perspective, this is slightly more than the total daily output of 7 coal fired power plants.Ā
Worldwide bitcoin mining uses 128 GWh per day. Bank branches in the USA use 88Ā GWh of energy per day.* Ā This does not include data centers, credit card processors, bank office buildings, or facilities for other financial services. In other words bank branches in the USA alone, use 69%** of the energy of worldwide bitcoin mining.Ā
According to Statista there are an additional 174,000 bank branches in the European Union. According to the world bank there are an additional 203,000 bank branches in India alone. If we assume that these banks have a similar energy-use profile as the USA then the carbon impact of all bitcoin mining is a small fraction of the impact of bank branches. In fact, if our energy use assumptions hold true, then the combined bank branches in the USA, EU, and India use approximately 620 GWh of energy per day! This is roughly 4.8 times the energy used to mine bitcoin per day and we havenāt even included the other two largest population countries: China (pop. 1.4 billion) and Indonesia (pop. 275 million).
Other popular cryptocurrencies such as chia, dogecoin, and Ethereum are more energy efficient than bitcoin mining. Cryptocurrency mining is often performed on rigs that are powered by renewable energy since it is the cheapest form of energy available. Mining hardware and blockchain protocols are improving to become more energy efficient as financial incentives push miners to seek the highest performance at the lowest energy costs. But even if none of this was true, cryptocurrencies are today more energy efficient than the financial industries they are replacing.
You may argue that the carbon impact of cryptocurrency mining is additive to the financial industry and has not replaced it. However, according to all my linked sources above, the number of bank branches is decreasing worldwide. This is probably not caused by cryptocurrency adoption but it will drive it. As banks offer fewer services, at fewer locations, for higher fees, people will seek alternatives. With its ease of use, and expanding acceptance, cryptocurrencies are the obvious replacements. This same process will repeat for other sectors of the financial industry. As soon as we can get home loans, buy stocks, and defer payments using cryptocurrency then itāll take over there as well.
The media has fed us a false narrative. The old-school financial industry is a corrupt, carbon-belching beast. As environmentalists we should be cheering about bitcoin and other cryptocurrencies replacing the finance industry. Itās a huge win for the planet.
*This may not be a perfect apples to apples comparison since the energy used for bank branches includes heating and cooling which may be produced onsite by furnaces and generators. However, these small scale power plants often produce more carbon per unit of energy produced. Bitcoin mining on the other hand uses electricity alone which is often powered by non carbon-emitting sources. The comparison favors bank branches.
