Bitcoin, the first cryptocurrency in history, was established in 2009 and has grown in value astronomically according to Forbes. Forbes estimates that if you invested $1,000 in Bitcoin when it first launched, it would be worth $41.5 million today.
As Bitcoin and other cryptocurrencies grew, environmentalists like CWU biology professor Dr. Clay Arango raised concerns about the impact they could have on the environment. “It’s a lot of energy,” Arango said. “Of course, if that energy comes from carbon-intensive sources like coal, natural gas, or oil, then you get all those associations with air emissions.”
According to CWU economics professor and sustainability economist Toni Sipic, cryptocurrency is a non-centralized currency, meaning it is not connected to any one source or entity like national currencies are. Since the creation of Bitcoin and its rise in value in 2018, more cryptocurrencies have appeared.
Sipic said that most cryptocurrencies are produced through a process called mining, which is when a computer solves a complex algorithm. Sipic said this process is called “proof of work.”
“So those [crypto] miners back that value with the capital and energy they put into making coins,” Sipic said.
Sipic said this “proof-of-work” process is where most of the environmental impact comes from. According to Sipic, the energy used by crypto mining is equal to the amount of energy Finland uses in a year.
Arango said that one reason emissions are a concern is because most of the energy used is produced by coal-fired power plants.
“In terms of air pollution, if we are talking about emissions from coal-fired plants, the carbon dioxide emitted into the air is, for all intents and purposes, irreversible for the life of human civilization,” Arango said.
According to Arango, atmospheric carbon takes between 100 and 2,000 years to break down, and ocean acidification caused by carbon emissions can take between 1,000 and 100,000 years to reverse.
Another thing Sipic noticed is that the real estate around the hydroelectric plants has been recently occupied by cryptocurrency miners.
“[The] The Columbia River is right here and we have a lot of hydroelectric dams and electricity is getting cheaper right next to those dams,” Sipic said. “We had aluminum smelters that were there, and now we have Bitcoin miners as well as data farms for Google and Amazon.”
Sipic compared cryptocurrencies to tulips in the Netherlands: the value of cryptocurrencies is speculative, meaning that instead of being backed by gold or silver like the US dollar, their value is determined by how much the people who invest in them they think people will want it. in the future. The value of cryptocurrency today and the value of tulips in the Netherlands during the 1630s were created entirely based on its demand and the demand that people thought it would have in the future.
“Values are something that humans create in their heads, there is no such thing as a price out there,” Sipic said. “As in the past in the Netherlands, the tulips had outsized values that [were] higher value than an entire house. And that’s because humans decided that’s the case, not because that’s the intrinsic value.”
Like the tulips in the Netherlands, Sipic predicted that the cryptocurrency will not hold its value forever.
Sipic said that economists argue that cryptocurrency need not have a negative impact on the environment due to the new “proof of stake” system being used in cryptocurrencies like Etherium.
According to Sipic, “proof of stake” awards cryptocurrency value based on how much owners own, similar to how the stock market works. Sipic said that while this is better for the environment as it doesn’t require mining, being based on quantity owned makes it more centralized, since it’s a more centralized system, he can’t see it becoming more popular than the ” work test”. .”