Hamilton, Canada — The exponential growth in the value of cryptocurrencies over the past decade has prompted a significant influx of investment capital into the cryptocurrency sector. Digital currencies have gained the confidence of a diverse range of investors, including prominent corporations, high-net-worth individuals in the technology sector, and those engaged in illicit activities such as money laundering and sanctions evasion.
As a consequence of the advent of blockchain and other technological innovations, digital currencies have become an integral component of the contemporary global financial system. It is even suggested that they have the potential to render the world's strongest currencies obsolete.
The exponential growth of the cryptocurrency market is analogous to the gold rush phenomenon. However, this dynamic market also presents several challenges and potential risks. The process of mining cryptocurrencies has the potential to exert significant environmental impacts on climate, water, and land, as evidenced by recent research conducted by United Nations scientists.
Bitcoin is the most renowned and popular cryptocurrency. This prompted the UN scientists to evaluate the environmental impacts of Bitcoin across the globe by examining the activities of 76 Bitcoin mining nations during the 2020–2021 period. The findings were striking. In addition to a considerable carbon footprint, global Bitcoin mining operations have notable water and land footprints.
“Technological innovations are often associated with unintended consequences and Bitcoin is no exception,” said Professor Kaveh Madani, the Director of the United Nations University Institute for Water, Environment and Health (UNU-INWEH), who led this study. “Our findings should not discourage the use of digital currencies. Instead, they should encourage us to invest in regulatory interventions and technological advancements that improve the efficiency of the global financial system without harming the environment.”
According to study results, published by the United Nations University and Earth’s Future journal, during the 2020–2021 period, the global Bitcoin mining network consumed 173.42 Terawatt hours of electricity. This means that if Bitcoin were a country, its energy consumption would have ranked 27th in the world, ahead of a country like Pakistan, with a population of over 230 million people. The resulting carbon footprint was equivalent to that of burning 84 billion pounds of coal or operating 190 natural gas-fired power plants. To offset this footprint, 3.9 billion trees should be planted, covering an area almost equal to the area of the Netherlands, Switzerland, or Denmark or 7% of the Amazon rainforest.
During this time period, Bitcoin's water footprint was similar to the amount of water required to fill over 660,000 Olympic-sized swimming pools, enough to meet the current domestic water needs of more than 300 million people in rural sub-Saharan Africa. The land footprint of worldwide Bitcoin mining activities during this period was 1.4 times the area of Los Angeles.
The UN scientists report that Bitcoin mining heavily relies on fossil energy sources, with coal accounting for 45% of Bitcoin's energy supply mix, followed by natural gas (21%). Hydropower, a renewable energy source with significant water and environmental impacts, is the most important renewable source of energy of the Bitcoin mining network, satisfying 16% of its electricity demand. Nuclear energy has a considerable share of 9% in Bitcoin’s energy supply mix, whereas renewables such as solar and wind only provide 2% and 5% of the total electricity used by Bitcoin.
China, by a large margin, has been the biggest Bitcoin mining nation. To offset the carbon emissions from China's coal-intensive Bitcoin mining operations in 2021–2022, about 2 billion trees should be planted, covering an area equivalent to the sum of Portugal and Ireland or 45,000 times the area of Central Park in New York City. Aside from China, the world’s top 10 Bitcoin mining nations in 2020–2021 included the United States, Kazakhstan, Russia, Malaysia, Canada, Germany, Iran, Ireland, and Singapore.
“Because countries use different sources of energy to generate electricity, their electricity production impacts on climate, water, and land are not the same,” said Dr. Sanaz Chamanara, the lead author of the study and an Environmental, Social and Governance (EGS) Research Fellow at UNU-INWEH. “The rankings of countries in terms of the environmental impacts of their Bitcoin operations change depending on which environmental footprint is considered.”
The countries of Norway, Sweden, Thailand, and the United Kingdom are among those that rank in the top 10 in terms of the water and land footprints associated with their Bitcoin mining activities. The top 10 countries engaged in Bitcoin mining collectively account for 92–94% of the global carbon, water, and land footprints associated with Bitcoin.
The UN scientists put forward a series of recommendations pertaining to potential government interventions to monitor and mitigate the environmental impacts of cryptocurrencies. Furthermore, the researchers propose the investment in alternative digital currencies that exhibit greater energy efficiency and reduced environmental impact. Furthermore, the investigation highlights the necessity for consideration of the transboundary and transgenerational impacts of cryptocurrency mining. "When one considers which groups are currently benefiting from Bitcoin mining and which nations and generations will suffer the most from its environmental consequences, it becomes evident that the unregulated digital currency sector is rife with inequity and injustice," stated Madani.
