Production of cryptocurrency units like Bitcoins is often referred to as ‘mining.’ This is a metaphor: the coins are actually secured via computers solving algorithms.
But this process has real-world impacts. Each $1 of Bitcoin value created in 2018 was responsible for $0.49 in health and climate damages in the U.S. and $0.37 in China, researchers report in a new study.
The reason is that cryptocurrency mining uses a lot of electricity.
Moreover, because of the way most cryptocurrencies are structured, the more coins that have already been produced, the harder the mining algorithms are to solve — so the electricity requirements are constantly increasing, along with the associated damages.
Cryptocurrency miners tend to locate in areas with cheap electricity. But the cheapest electricity isn’t necessarily associated with the lowest environmental and health damages.
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And it’s hard to regulate and tax cryptocurrency mining in a way that would hold miners accountable for these damages. The development of new systems of cryptocurrency that aren’t so energy-intensive could be a way to resolve this problem.
Name of Author: Sarah DeWeerdt