Some cryptocurrency players aim to shrink their carbon footprint with a self-regulating agreement, but critics claim it distracts from more efficient government regulation. In a cryptocurrencies banner year (so far), not all news will be good. As Bitcoin and other digital coins have risen in value since January, Earth’s toll has gained even more attention.
High-profile Bitcoin backers came out to protect their favorite cryptocurrency. A study released last week, funded by Tesla Inc’s Elon Musk, Jack Dorsey from Square Inc, and Cathie Wood from ARK, one of Wall Street’s hottest investment pros, portrays Bitcoin as an “ideal” part of renewable energy ventures involving solar, wind and battery storage technology.
CCA announcement
Meanwhile, earlier this month, a group of crypto firms and organizations announced the Crypto Climate Accord (CCA), an industry-driven deal in which signatories pledge to turn to renewable energy sources to power operations by 2025 and go entirely net-zero by 2040.
But, in an era when previously unrepentant major polluters suddenly find a green consciousness, concerns abound as to whether the agreement is a game-changer or merely a greenwash of a growing issue.
Bitcoin mining – where powerful computer rigs race around the world to validate transactions hoping to win new Bitcoins – consumes as much electricity annually as Argentina’s entire nation, researchers at Cambridge University estimate.
According to supporters, huge carbon footprint – rather than rising public outrage about it – motivates them to roll up their sleeves and get down to work.
CCA is led by three non-profit groups: the Rocky Mountain Institute, non-profit sustainability; the Alliance for Innovative Regulation, which promotes a fair financial system; and the Energy Web Foundation, which focuses on open-source technology to accelerate low-carbon transition.
“We recognise crypto uses a lot of resources, so let’s make it 100% green,” said Jesse Morris, chief commercial officer at Energy Web.
Rather than “a political handshaking item,” Morris says the agreement is a “toolbox for action” aimed at generating a critical mass of cryptofirms following a decarbonization strategy.
“If you’re an application-building Bitcoin miner, we want you,” he said.
But critics charge a self-regulated agreement could hinder more successful government policies to rein in cryptoemissions.
Efficient control brake?
The agreement included many high-profile backers, ranging from French electric utilities Engie and former US presidential billionaire Tom Steyer to the companies behind the cryptocurrency XRP, also referred to as “Ripple.”
Monica Long, RippleX payment network general manager, told Al Jazeera that her company expects to become carbon neutral by 2030, aligning it with other members of the agreement.
Ripple has a leg up on that front.
Bitcoin high carbon footprint
Bitcoin has such a massive carbon footprint because it depends on work-proof (PoW) consensus to verify transactions and generate and distribute new coins. The most successful “mining machines” racing to check transactions for the reward of new Bitcoins are mostly made up of thousands of unison-worked computers eating vast quantities of electricity.
By comparison, Ripple doesn’t reward mining with new coins. Instead, it uses less energy-intensive consensus protocol to verify system account balances and transactions.
Other lesser-known cryptocurrencies use stake proof (PoS) – often a much less energy-intensive method of verifying transactions, as mining power is not measured by how many machines crunch numbers at once, but by how many coins the miner currently owns.
“Generally we’re bullish on crypto,” Long said. “But I still believe it’s a multi-chain future.”
That suggests energy-sucking PoW won’t leave soon anytime.
Given that about 60 percent of Bitcoin mining worldwide is fuelled by fossil fuels, and about 65 percent of mining is located in China where coal-fired power does much of the heavy lifting, some analysts claim the agreement could interfere with more successful government-driven solutions to the crypto-carbon issue.
Ban of PoW mining
“To avoid Bitcoin’s climate catastrophe, governments need to ban PoW mining,” Pete Howson, an environmental researcher at Northumbria University, told Al Jazeera. “The Crypto Climate Agreement, by reflecting Bitcoin miners’ interests, puts the brakes on such successful regulation.”
Howson also argues that the relatively small-scale mining startups that entered the CCA represent “a drop in the ocean,” considering the problem’s scale.
“Even if new Bitcoin mining projects open up and commit to using only leftover renewables, miners in other parts of the world – where there is no renewable infrastructure – must work harder, purchase more servers and burn more fossil fuels,” he said.
Argo Blockchain, who attended the London Stock Exchange in 2018, joined the CCA last Thursday, April 22 on Earth Day.
The company first set up mining facilities in Quebec with cheap hydropower, Peter Wall told Al Jazeera.
“It’s important for me as a person, as a business, not to use fossil fuels, particularly coal, to mine Bitcoin,” he said. “If Bitcoin is the future reserve asset, it must be generated with the future power source: renewable energy.”
Argo spread to the United States in early 2020, with plans to construct its flagship 200-megawatt mining facility on 130 hectares in Texas. Cheap wind power nearby.
Wall—whose company receives 90 percent of Bitcoin’s revenue—differentiates filthy, traditional Bitcoin from genuinely green Bitcoin.
The agreement seeks to do that, too, by introducing an open-source accounting standard to measure emissions.
But measuring polluters could still prove highly challenging for an often anonymous industry, particularly where traceability and verification are concerned.
“We need to make sure that [mining operations] are in line with other practises to stop greenwashing or astroturfing,” Wall said.
Another mining company that has been discussing partnering with CCA organisers is Gryphon Digital Mining, which uses only low-cost, off-grid hydropower from Upper New York for its operations.
Billing itself as the first Bitcoin mining company dedicated to 100% renewables, Gryphon hopes it can indeed show that there is no trade-off between financial success and environment.
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