It comes up again and again: cryptocurrency is bad for the environment. Blockchain burns electricity. Bitcoin has an unforgivably huge carbon footprint.
But how true is this, really?
Recently, cryptocurrency has been in the news again, with everyone from economists to TV stars taking a stance against its validity and safety for consumers. And press like this can be a real blow to the people working hard to improve crypto’s public image and communicate its real potential.
In almost all of the bad press, the point about crypto being bad for the environment comes up again and again. And yet it’s rarely discussed with any real evidence to back it up. In this Guardian article, for example, the writer briefly references “environmentally disastrous cryptocurrency mining facilities” but does nothing to explain why those facilities are so disastrous.
And listen, we know the LEAP blog isn’t going to get in front of as many eyes as the biggest mainstream media outlets in the world. But we wanted to speak up in support of crypto in our own way – and do a little bit of fact-checking on the claims that crypto is a carbon atrocity.
Let’s compare bitcoin to banks
As the world’s biggest cryptocurrency by market capitalisation, Bitcoin gets a lot of the bad press about crypto and the environment. But critics usually fail to include any figures about actual energy consumption in their claims against Bitcoin, or even to clarify what ‘energy consumption’ actually means – are they talking about electricity? Are they talking about only the energy used to mine Bitcoin, or all of the energy used across every function of the crypto industry?
In a 2022 report, Michel Khazzaka (IT Engineer and Cryptographer) undertook a detailed analysis in order to compare Bitcoin with the banking industry. The findings, based on four years of research, revealed that the banking sector uses 56 times more energy than Bitcoin.
In an interview with Cointelegraph, Khazzaka said:
“Bitcoin Lightning, and Bitcoin, in general, are really great and very efficient technological solutions that deserve to be adopted on a large scale. This invention is brilliant enough, efficient enough, and powerful enough to get mass adoption.”
Most critiques of Bitcoin’s energy usage, or of the environmental impact of cryptocurrency in general, fail to highlight the energy used by the alternative: conventional banking. But taking into account the creation of money, the transportation of money, and physical banking infrastructure, Khazzaka calculated that banking consumes almost 5,000 Twh of energy per year. In contrast, he calculates that Bitcoin uses 88.95 Twh.
Of course that doesn’t mean that Bitcoin is good for the environment. But it does mean it has a much smaller impact than banking.
But isn’t crypto bad because it relies on fossil fuels?
Still speaking about Bitcoin specifically, the currency’s network relies on a group of computers (in different locations around the world) to run complex mathematical equations. While the term ‘mining’ is often used to describe the process, these computers actually act more like network protectors – they perform a process called ‘proof-of-work’, which prevents attacks and breaches.
Crypto advocates often argue that proof-of-work is becoming increasingly energy efficient, and that more miners are using renewable energy sources instead of fossil fuels. But this isn’t necessarily true – one 2022 study, for example, found that the Bitcoin network used only 25% renewables in August 2021, down from 42% in the previous year.
While this suggests Bitcoin’s use of renewables could be on a downward trend – or at least, not a consistent upward trend – it’s still a bit of an unreasonable leap for the world to then cry: There! You see! Crypto uses fossil fuels, crypto is bad!
Because again: what are we comparing it to?
The 14th annual Banking on Climate Chaos report, released in April 2023, claims to be the most comprehensive global analysis on fossil fuel banking. And it reveals that the largest 60 private banks in the world have poured USD $5.5 trillion into fossil fuels since the adoption of the Paris Agreement in 2015. In 2022 alone, in spite of the fact that fossil fuel companies reported record profits, banks still boosted them with $673.1 billion in financing.
Crypto’s not perfect, but it’s important to put it in context
We’re not saying crypto is the golden bullet for climate change. But what we are saying is that the negative press crypto gets is often based on narrow assumptions. People repeat what others have said about cryptocurrency being bad for the environment, without actually looking at the research.
Context is everything. So count this as our call to the mainstream media: instead of just saying crypto is bad and leaving it at that, please put your analysis of crypto’s environmental impact in the context of other industries, and give your audience a balanced view.