- The latest report by Imperial College Business School shows that ignoring the environmental costs of crypto mining could be “a grave mistake”.
- The author suggests moving to environment-friendly methods and adopting greener alternatives like Proof-of-Stake.
The Imperial College Business School has released a new report stressing the need to make cryptocurrencies less energy-intensive in order to protect the planet.
The report “Damage Litigation: Cryptocurrencies and Climate Change” mentions that continued investments in energy-sensitive cryptocurrencies could increase the probability of a global climate crisis. The report’s author Carmine Russo, a visiting researcher at the Centre for Climate Finance & Investment at Imperial College Business School said that the major pollution caused by digital assets is generated through byits mining procedure.
This is concerning cryptocurrencies that use the Proof-of-Work consensus mechanism, most notable for being used by Bitcoin. This consensus mechanism employs a highly energy-intensive algorithm making crypto mining environmentally unsustainable. It requires high-performance machines for miners to solve complex algorithms and add new blocks to the network.
Ignoring environmental costs won’t work
Russo says that the fastest miner who can solve the algorithm receives the rewards. Others in the competition just end up wasting huge amounts of energy. The higher the machine performance, the higher energy they consume thus simultaneously increasing the environmental costs.
In the past, several people have also opposed Bitcoin’s high energy consumption. This was also the reason that Tesla decided to discontinue Bitcoin payments and China announced a complete ban on Bitcoin mining. However, over the last year, a large of Bitcoin mining has moved to the use of green energy.
In the report, Russo mentioned that ignoring environmental damage by crypto mining would be “a grave mistake”. He added:
The question becomes a dubious trade-off: are we more scared of the predictable consequences of a financial crisis or the unpredictable ones of a climate crisis?
Cryptocurrency has become a popular trend, with an ever-increasing number of users. However, the picture of digital currency is far from uniformly positive. Behind the decentralised cryptocurrency system there are significant concerns, especially with respect to environmental damage.
Adopting climate-friendly methods
In the report, the author notes that adopting a crypto-friendly method is the need of the hour. It also mentions how a Proof-of-Stake (PoS) mechanism is a greener alternative considering its design. The world’s second-largest crypto blockchain network Ethereum is all set for the transition to a PoS model via the Merge upgrade ahead in September.
Unlike the PoW model, there’s no complex algorithm to solve in the case of the PoS model. Thus, there’s no need for powerful computing machines which makes the process less energy intensive. As opposed to miners in the case of PoW, there are stakers in the case of PoS. These stakers are randomly chosen by the system thus there are no competing forces like the miners.
Russo recommends that regulators should force crypto miners to disclose the climate-related impacts of their activities. “In doing this, legislators may be able to maximise the positive financial role that cryptocurrencies can play in the economic system, while also addressing the environmental damage caused by their creation and usage,” Russo adds.
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