What is Cryptocurrency Impact on the Environment?

Cryptocurrency is best referred to as digital currency that is algorithmically encrypted. It serves the dual purpose of both virtual currency and a self-balancing accounting system for the users. Users normally need a wallet to store, trade, and exchange digital currencies.

The sudden rise in the price of cryptocurrency from $1,000 to $ 20,000 brought about great fortune to crypto investors, especially because you can now buy Bitcoin with credit card. The rise in the value of the cryptocurrency has opened the floodgate to millions of crypto investors who regard themselves as HODL (hold on for dear life).

The cryptocurrency market has benefited humanity immensely from revenue generation, security in online transactions, growth in the financial sector, and economic prowess. Nonetheless, it is not without its challenges. The sudden increase in crypto investors has been generating concerns from environmental experts due to the threats crypto mining poses to the environment. Some impacts of cryptocurrency on the environment include:

Energy Consumption

The process of creating a cryptocurrency is mining, and it is not only capital intensive but also requires a lot of energy. The creation involves an energy-intensive process due to a lack of central regulatory authority. To prevent blocks of information from being manipulated, blockchains are usually very expensive to verify. 

The process of verifying often involves what is known as proof of work. Those involved in this proof of work are expected to solve a very difficult mathematical problem before they are given access to validate the cryptocurrency. Usually, the first person to solve the problem can validate and get an amount of cryptocurrency.

Getting to the root of the mathematical problem is mining, and it is one of the most profitable means of investing in cryptocurrency. The resources at one’s disposal increase or limit one’s chance of getting the solution. Application-Specific integrated circuits (ASIC) have been created to increase computing ability and solve these problems.

As a result of the rewards involved, there is stiff competition among miners to be the first to solve the problem. The implication of this is that a lot of energy is consumed. Other forms of validation have been created as an alternative to the energy-consuming proof of work. These include:

  • Proof of Stake

Blockchain technology selects a node randomly when a miner needs to validate a block. For this validation system, miners are given mining rights according to the value of Bitcoins they already possess. The coins of the miners have been locked away to create validation nodes. If a minor attempts to validate an inaccurate block, he will lose some of his coins. 

This validation system does not require as much energy consumption as proof of work. However, the system has been under criticism because those who have more coins get more benefits

  • Proof of Burn

This mechanism of validation is a hybrid of proof of work and proof of stake. This system allows miners to generate a virtual rig that works according to burnt coins. When a coin is burnt, it is removed from circulation.

Proof of burn does not consume energy as much as proof of work. This is because it was built specifically to address the issues with proof of work. However, it is still relatively new and unpopular: not many people prefer it.

  • Proof of Capacity

In this system, a mining hard drive’s storage space is used to validate. Any space on the mining device is used to store possible solutions to algorithms. This implies that one is more likely to get accurate answers to the algorithms.

  • Proof of Elapsed Time

This is a random style of validation where miners are selected randomly from a pool to validate. This system is often used by blockchains that require permissions before blocks can be accessed, and it is not used for public-access blockchains.   

Despite these other mechanisms, proof of work is still the most popular. As such, a lot of energy is still used in cryptocurrency mining, generating a lot of energy waste.


Research has shown that bitcoin produces about 114 million metric tonnes of carbon dioxide yearly. The reason is that Bitcoin is mined more in countries that rely on coal energy, thereby using a lot of fossil fuel that is damaging to the environment. In recent times, however, more mining industries have been built.

These mining industries rely on renewable energy rather than fossil fuel. As a result, displaced cryptocurrency miners from other countries are now finding a home in the countries where these new mining industries are located.


At the individual and institutional level, the effort is being made to reduce the environmental hazards generated by cryptocurrency. Experts have, however, stated that it is unlikely for Bitcoin to make any changes to its use of proof of work.

Users love virtual currencies at all levels because they do not change and are uniform in value globally. While prospects have several options, the right education is needed not to make the wrong choice.