Crypto energy consumption has faced increasing scrutiny across the globe. To avoid environmental damages, should crypto mining be regulated for energy use? The answer will determine the future of crypto.
As the world faces a growing number of climate disasters amidst an ongoing reliance on fossil fuels, revelations about the impact of crypto mining on energy consumption are important to note.
Bitcoin mining alone has been found to consume around 91 terawatts-hours annually, a rate nearly seven times higher than that used to power Google searches worldwide. With a power demand this high, governments are asking if crypto mining should be regulated to maintain sustainable energy use.
Already, some nations around the world are implementing crypto mining regulations. The nature and scale of these regulations will determine the future of cryptocurrencies as a whole. Explore this future by considering the issue and the many questions that influence it.
Regulations in Crypto Mining
Right now, we are living at a crucial point in cryptocurrency history. Governments all over the world are taking to the question of crypto mining regulation as more reports emerge of its environmental impact. From the US to China, legislatures are responding to the situation differently, and these various responses have big implications for crypto miners.
By exploring and understanding these regulations, consumers can gain clearer insights into the future of crypto as a whole. These are some of the recent regulations changing the field of crypto mining.
The United States, by nature of its legislative composition, has a patchwork system of laws and regulations guiding its energy use in various markets. For the most part, however, no regulations on crypto mining exist beyond some tax incentives in certain states. Montana, for example, offers property tax abatements for qualifying crypto mining operations.
However, this may change in the near future. An altered definition of digital asset “brokers” was included in a proposed infrastructure bill, which could, if passed, change the reporting and record-keeping requirements of crypto generation.
The US has become the primary haven for crypto miners because of bans on mining in the former digital currency capital: China. This international power decided in the summer of 2021 to throttle crypto transactions by banning crypto mining outright.
China cites the energy costs of crypto mining as playing a key role in their decision. Officials say the mining of these currencies is “extremely harmful” to their carbon neutrality goals. Now, other nations are following suit, and Sweden is calling on the EU to institute such a ban in an effort to meet its own carbon goals.
China is one of a growing list of countries with crypto mining bans in place. Here are some of the others:
Now, Russia is also debating curbing crypto mining within its borders for a host of reasons. At the tail end of these reasons come the energy consumption tied up in mining crypto.
We see regulations and bans on crypto mining spread throughout the world. However, energy use does not appear to be the chief concern of many restrictive countries. China and other nations are taking additional factors into account with these bans, including the protection of their own centralised and digital currencies.
For governments and even business leaders exploring the applications of crypto mining, a few important energy consumption questions should first be considered.
Questions to Consider
Regardless of whether crypto mining should be regulated for any other reason, the energy use inherent in producing these digital currencies should be part of the discussion. Research continues to reveal problematic information involved with crypto mining. From the demands on power grids to the amount of e-waste produced, these aspects of crypto mining carry greater implications for global health.
For example, only an estimated 20% of electronic waste is recycled properly. Massive amounts of toxic chemicals seeping into the earth from fried mining platforms years down the line may create more problems and expenses than crypto is worth.
The energy costs associated with cryptocurrencies bring up a host of questions to consider. Before more markets move forward with greater regulations, these questions must be addressed.
Green energy in crypto mining
First and foremost, mining regulators must explore whether or not cryptocurrency can be mined in a renewable and sustainable manner, or if the process is doomed to draw on fossil fuels. Fortunately, the answer to this is fairly straightforward.
Cryptocurrency mining always consumes power, but the nature of that power source can be renewable or nonrenewable. Some cryptocurrencies, like Cardano, make use of more efficient technology. Others, like BitGreen, offer users incentives for engaging in environmentally-friendly activities. If renewable energy sources and efficient processes are utilised, crypto mining can become less environmentally impactful.
However, it’s difficult to say if crypto mining can ever be fully carbon neutral.
Are crypto miners uniquely responsible for managing their energy consumption?
When determining the regulations needed for energy use in crypto mining, it’s important to consider the role crypto miners play in managing their energy consumption. Mining a single Bitcoin would cost an estimated USD$12,500 on the average home energy bill. With energy costs this high, it’s in the best interests of miners to streamline efficiency and use renewable energy sources.
For example, miners might install solar energy panels to aid in the generation of clean energy for mining purposes. With renewables accounting for only 17% of electricity generation in the US crypto as a means of incentivising renewable energy cultivation may be desirable.
Is crypto worth the energy consumption?
Finally, regulators have to ask if crypto mining is even worth the draw on energy resources for the time being. Digital currencies produce a host of benefits, including financial solutions for the bank-less and financially underserved. However, the massive power bill won’t be sustainable without greater efficiency and integration of renewable energy sources.
By 2024, an anticipated 30% of the world’s fuel will be generated renewably, but until then crypto miners are relying on mostly dirty energy sources. For crypto energy consumption to be worthwhile, greater advancements in renewable utilisation will have to spread across international infrastructures.
A Path Forward for Sustainable Crypto
As governments across the world ask the big question on crypto regulation for energy usage, a path forward for sustainable crypto remains in sight. Already, sustainability-focused currencies have hit the market. Meanwhile, the potential for solar and wind energy output is roughly 100 times as much as global energy demand.
Regardless of whether current crypto mining bans are permanent or just while green infrastructures are improved, the regulation question will change with the technology. Before regulating your own use of cryptocurrency, consider these questions and their implications for global trade.
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