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The Dangers of Crypto Mining: What is the US Doing About It


Written by: Meghana Praveen

Monday, December 18, 2022


Following the recent ‘Climate and Energy Implications of Crypto-Assets in the United States’ report by the White House, concerns over Crypto's carbon footprint have skyrocketed. The US leads crypto mining globally with almost 38 percent of blockchain computation recorded within the country (1). The report revealed that the energy consumption of crypto mining and transactions exceeds that of large nations such as Australia and Argentina (2).


The mining process also produces GHG emissions, exacerbating climate change through the burning of coal and natural gas smoking other fossil fuels. This is due to the immense amounts of energy required to run banks of computers to solve the mathematical equations to “mine” bitcoin and other cryptocurrencies. The US emits around 40 million metric tons of carbon dioxide emissions out of the 140 (± 30) million metric tons emitted globally due to mining (2). Therefore, it is crucial that legislation be developed to reflect the country’s impact.


Due to the growth of popularity of crypto it is unlikely to expect a reduction in its use in response to its environmental impact. The best way to combat the issue is to support laws that redirect the mining towards under-utilised areas and increase the use of renewable energy in the processes. New York is the first US state to do so with Governor Kathy Hochul, whose primary campaigning policy was climate change, signing the partial measure on November 22, 2022. The law is a partial ban on crypto currency mining operations that are fossil fuel-powered. She states, “I am signing this legislation into law to build on New York’s nation-leading Climate Leadership and Community Protection Act, the most aggressive climate and clean energy law in the nation, while also continuing our steadfast efforts to support economic development and job creation in upstate New York.”(3). The ban is unfortunately not retrospective, leaving companies that have already filed paperwork for mining unaffected by the moratorium. Crypto mining is a large issue in New York due to the attractiveness of the unused infrastructure: former coal power plants (the last one was shut down in 2021). This move by the New York government is the first of its kind in the US, but comes as no surprise on a global scale. It follows similar policies taken by countries, particularly China cracking down on Bitcoin mining last year in order to meet their climate goals. Although a small step, activists are hopeful that the New York ban leads to an incremental enforcement across the country.


An alternative to the imposition of bans on using nonrenewable energy resources for mining, is through the use of an alternative consensus mechanism. The electricity usage to mine crypto is generally driven by these consensus mechanisms, which are the distributed ledger technologies used to mine and verify crypto-assets. Currently, the dominant one is called Proof of Work, used by large establishments like Bitcoin. Proof of Stake, an alternative, less energy-intensive mechanism, is estimated to consume up to 0.28 billion kilowatt-hours per year in 2021, less than 0.001 percent of global electricity usage (2). Ethereum, which, along with Bitcoin make up 60 percent of total crypto-asset market capitalization (2), have been making the shift to this alternative. Legislation can also be created to push for Proof of Stake.


The New York bill has not been without opposition. Crypto advocacy group, the Chamber of Digital Commerce has denounced the bill: “To date, no other industry in the state has been sidelined like this for its energy usage. This is a dangerous precedent to set in determining who may or may not use power.”(4). But accusations of this sort fail to view the legislation for its true purpose, which is the redirection of mining towards more renewable energy sources.




Bibliography


  1. https://www.forbes.com/advisor/investing/cryptocurrency/bitcoins-energy-usage-explained

  2. https://www.whitehouse.gov/wp-content/uploads/2022/09/09-2022-Crypto-Assets-and-Climate-Report.pdf

  3. https://www.politico.com/news/2022/11/22/cryptocurrency-mining-ban-new-york-00070613

  4. https://www.nytimes.com/2022/11/22/nyregion/crypto-mining-ban-hochul.html





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