In a banner year for cryptocurrencies (so far), not all of the news is going to be good.
As Bitcoin and other digital coins have soared in value since January, the toll they are taking on planet Earth has garnered far more attention.
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High-profile Bitcoin supporters have come out in force to defend their favourite cryptocurrency. A report published last week – sponsored by Tesla Inc’s Elon Musk, Square Inc’s Jack Dorsey, and ARK’s Cathie Wood, one of Wall Street’s hottest investment pros – depicts Bitcoin as an “ideal” part of renewable energy projects involving solar, wind and battery storage technology.
Meanwhile, a coalition of crypto firms and organisations earlier this month announced the Crypto Climate Accord (CCA), an industry-driven pact in which signatories vow to switch to renewable energy sources to power operations by 2025 and go completely net-zero – eliminating greenhouse gas emissions altogether – by 2040.
But in an age in which previously unrepentant big polluters are suddenly finding a green conscience, questions abound as to whether the accord is a game-changer or simply a greenwash of a growing problem.
Bitcoin mining – in which powerful computer rigs around the world race to verify transactions in the hope of winning new Bitcoins – consumes as much electricity annually as the entire country of Argentina, researchers at the University of Cambridge estimate.
Supporters of the accord say that massive carbon footprint – rather than the growing public outcry over it – is motivating them to roll their sleeves up and get down to business.
We recognise that crypto does use a lot of energy, so let’s make it 100-percent green.
CCA is led by three nonprofit groups: the Rocky Mountain Institute, a sustainability non-profit; the Alliance for Innovative Regulation, which advocates for a fair financial system; and Energy Web Foundation, which focuses on open-source technologies to accelerate the low-carbon transition.
“We recognise that crypto does use a lot of energy, so let’s make it 100-percent green,” Jesse Morris, chief commercial officer at Energy Web, told Al Jazeera.
Rather than “a political handshaking thing,” Morris says the accord is a “tool box for action” that aims to generate a critical mass of crypto firms following a decarbonisation plan.
“If you are a Bitcoin miner building out applications, we want you,” he said.
But critics charge that a self-regulated accord could get in the way of more effective government policies for reining in crypto emissions.
A brake on effective regulation?
The accord has picked up plenty of high-profile supporters ranging from French electric utility Engie and billionaire former US Presidential hopeful Tom Steyer to the entities behind the cryptocurrency XRP, often referred to as “Ripple”.
Monica Long, the general manager of the RippleX payment platform, told Al Jazeera that her company plans to become carbon neutral by 2030, aligning it with other members of the accord.
On that front, Ripple has something of a leg up.
Bitcoin has such a massive carbon footprint because it relies on something known as a proof of work (PoW) consensus to validate transactions and create and distribute new coins. The most competitive “mining rigs” that race to verify transactions for the reward of new Bitcoins are often comprised of thousands of computers labouring in unison and eating up massive amounts of energy.
By contrast, Ripple does not reward mining activities with new coins. Instead, it uses a less energy-intensive consensus protocol to validate account balances and transactions in the system.
Other lesser-known cryptocurrencies use proof of stake (PoS) – also a far less energy-intensive method of verifying transactions because mining power is not determined by how many computers are crunching numbers at once, but by how many coins the miner currently owns.
To stop the climate disaster that Bitcoin is causing, governments need to ban PoW mining.
“We’re bullish on crypto generally,” Long said. “But I really do believe it’s going to be a multi-chain future.”
That suggests that energy-sucking PoW isn’t going to go away anytime soon.
Given that around 60 percent of Bitcoin mining globally is powered by fossil fuels, and about 65 percent of mining is located in China where coal-fired power does the majority of the heavy lifting, some observers say the accord could get in the way of more effective government-driven solutions to crypto’s carbon problem.
“To stop the climate disaster that Bitcoin is causing, governments need to ban PoW mining,” Pete Howson, an environmental researcher at Northumbria University, told Al Jazeera. “The Crypto Climate Accord, by representing the interests of Bitcoin miners, puts the brakes on that sort of effective regulation.”
Howson also believes that the relatively small-scale mining startups that have joined the CCA represent “a drop in the ocean” given the scale of the problem.
“Even if new Bitcoin mining ventures open up and commit to using only leftover renewables, miners in other parts of the world – where renewable infrastructure doesn’t exist – have to work harder, buying more servers and burning more fossil fuels,” he added.
‘Need to get it right’
Argo Blockchain, which went public on the London Stock Exchange in 2018, is in discussions with the CCA about joining.
The firm first set up mining facilities in Quebec with cheap hydropower, Argo CEO Peter Wall told Al Jazeera.
“It’s important for me as an individual, and as a company, not to be using fossil fuels, particularly coal, to mine Bitcoin,” he said. “If Bitcoin is the reserve asset of the future, it needs to be created with the power source of the future: clean energy.”
Argo expanded into the United States in early 2020, with plans to build out its flagship 200-megawatt mining facility on 130 hectares (320 acres) in Texas. The draw: cheap wind power nearby.
Wall – whose company earns 90 percent of its revenues from Bitcoin – differentiates dirty, conventional Bitcoin from legitimately green Bitcoin.
The accord aims to do that too by developing an open-source accounting standard for gauging emissions.
Consumers and investors vote with their wallets for companies that are responsible citizens.
But measuring polluters could still prove highly challenging for an industry often shrouded in anonymity, especially where traceability and verification are concerned.
“We need to get it right, to make sure [mining operations] are in line with other standards and avoid the appearance of greenwashing or astroturfing,” said Wall.
Another mining company that has been in discussions with CCA organisers about joining is Gryphon Digital Mining, which uses only uses low-cost, off-grid hydroelectric power from upstate New York for its operations.
Billing itself as the first Bitcoin mining company committed to 100-percent renewables, Gryphon is hoping it can indeed prove that there does not have to be a trade-off between financial success and the climate.
“These are the early days for crypto,” Dan Tolhurst, Gryphon’s co-founder, told Al Jazeera. “Consumers and investors vote with their wallets for companies that are responsible citizens.”