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Cryptocurrencies: a virtual economy that weighs hard on real ecology…

Bitcoin, Ether, Ripple, etc… these names ring a bell? Moneys of the future for some or danger for others, one thing is sure: cryptocurrencies are more and more presents in our economy. But what is their impact on environment? Is it as much virtual? Not so sure…

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What is a cryptocurrency?

Cryptocurrency or cryptographic moneys are alternative exchange moneys to our current moneys. Their particularity is that they are entirely virtual, therefore it is impossible to change them for bills or coins. Contrarily to our moneys which are managed by institutions such as governments or banks, cryptocurrencies do not depend of a government therefore they are apolitical. Nevertheless, they are regulated by an informatic system under the form of “block chains” that control transactions which are public. The most common cyrptocurrency is Bitcoin, which is also the first one, created in 2009. Since then, the number of cryptocurrencies on the market hasn’t stopped increasing like their value and weight in our economy. Some see them as replacement for our current moneys in the coming years.

A virtual money and not corrupted by political hazards? It seems as a progress for environment! But the ecological footprint of cryptocurrencies is reel…

Mining”: an energy-consuming activity

Mining is the action of creating the cryptocurrency. Consumers take part in a series of transactions in the block chains of the virtual platform; amongst these participants who invested some capacity of the server in the chain, the one who achieves the series of transactions (and only him), gets some of the created cryptocurrency. Theoretically, it only takes one “miner” to the system, but the number of daily transactions is over 30 000 today.

This is explained by the current value of cryptocurrencies. Today, a bitcoin is worth more than 4000 dollars and this figure is constantly exponentially increasing. A great motivation for anyone to be a part of this system… signing up on an informatic platform seems to be an inoffensive activity and it is in fact, when the transactions are made by Mister Nobody from their computer. But with the development of cryptocurrency and the growing need to increase their number (their flow on the market was multiplied by 15 this year) mining farms emerged on every continent and mainly in China since energy is cheap. In these “farms” there are long corridor where are aligned hundreds of mining servers. These machines are very energy-consuming: this industry consumes more than 288 MW according to the study led by Global Cryptocurrency Benchmarking which is 96 times a country consumption such as Ireland or Morocco! This electricity does not come from renewable energies especially since these mining farms are located in developing countries where it is cheaper. In China, electricity powering these farms is produced in coal power plant that reject a significant amount of CO2 or greenhouse gas.

The power required for networks such as the one for Bitcoin is gigantic, today it is 100 times bigger than Google’s while this latter has 1000 times more users than the Bitcoin network. What will happen to environment if the network of cryptocurrency reaches a public as big as Google’s public?

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An excessive pollution

The value of cryptocurrency increases every day and by subsequent so does their popularity. Some even aspire to make it the currency of the future, replacing the dollar, yen or euro. And yet the current environmental outcome is already too heavy especially since the energy invested is often useless. If cryptocurrencies were to be generalized and become a mass currency, their energy consumption could go as high as 4000 MW which is 8 times the electric consumption in France and twice in the USA. Furthermore, we would be facing a new problem: a bitcoin transaction would spend 3994 times more energy than a transaction effectuated with a classic bank card. Therefore, it is difficult from an ecological point of view to replace our banks by these networks.

So, what alternatives?

Firstly, methods. The partisans of “proof of work” claim that it could regulate the number of miners. The idea of this system is simple: the user wanting to mine cryptocurrency should prove beforehand that he already owns a specific quantity. If it seems easy in theory, it is however a bit more complex to set up on a large scale since transactions and platforms are public. A new mechanism the “proof of stake” suggests regulating transactions, this time by imposing to the consumer to accumulate the cryptocurrency as a first step, to be able to be chosen to mine a block (currency). In this system, the more cryptocurrency, the more chances to be selected you have. Once again, the setting up would be hazardous but these alternative systems would allow for a reduction of energy consumption.

Then, means. We saw that most of the energy used for these networks comes from coal plants (in China) and that their energetic needs will be more and more significant. Therefore it would be wise to look after renewable energy sources that would be less pollutant and more respectful of the environment. It is already done, by a mining company Hydrominer located in Austria that uses hydroelectricity produced in the Alps. This electricity is known as “clean” because it only emits few CO2. The company that reduces its energy expenses can compete with big Chines mining farms. To be generalized?

The quantity of energy not used is huge and is lost by large plants mainly in the form of heat. Companies such as Qarnot and Stimergy are looking to recycle this energy in a more intelligent way. The idea would be to recover this heat produced by servers to reallocate it then; in addition, this could cool down these power stations.

This money seems revolutionary by its virtual feature, non-governmental and public but proves to have an environmental impact that is real and negative. The number of figures presented behind this screen can be appealing and look inoffensive but let’s not forget that every choice, even just a click, has a cost.