The impact of blockchain and cryptocurrencies are “historically associated with an ever-increasing environmental impact” (Wendl, Doan and Sassen, 2023).
However, this is largely true only for Proof of Work based blockchains, with increasing demands for greater computational power in order to mine efficiently. Blockchains that use other systems such as Proof of Stake, such as Etherium, are considered a sustainable alternative (ibid.).
Environmental Impacts
Proof of Work requires miners have up-to-date machines to stay competitive, with massive environmental impact (ibid.). To create the over one million devices currently mining required considerable precious metals, silicon wafers and other resources (ibid.).
The power consumption used by Bitcoin mining worldwide is approximately equal to half the United Kingdom’s, and more than that of Pakistan or the Ukraine (CBECI, 2023). Since China banned cryptocurrency mining in 2021 the carbon emissions of the industry have only increased, due to use of less renewable energy sources (Davies, 2022).
Econmoic Impacts
A single universal currency would help developing countries, due to its decentralised nature allowing for easier international trade (Internal Finance, 2022). This decentralisation also makes it much more difficult for fraud or corruption to take place, as is possible with conventional currencies (Cruz, 2022).
While the future of Bitcoin as the global standard currency is unlikely (Tamny, 2021), many banks are researching blockchain and cryptocurrency technologies for use with digital currencies (Bank of Canada, 2022; Bank of England, 2023).
This blog post was originally written as part of a project for the BSc (Hons) Cybersecurity with The Open Univeristy by Jonathan Brogan and is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.
References
Bank of Canada (2022) Central bank digital currency, bankofcanada.ca. Available at: https://www.bankofcanada.ca/digitaldollar/ (Accessed: 22 May 2023).
Bank of England (2023) The digital pound, www.bankofengland.co.uk. Available at: https://www.bankofengland.co.uk/the-digital-pound (Accessed: 22 May 2023).
CBECI (2023) Cambridge Bitcoin Electricity Consumption Index, ccaf.io. The Cambridge Centre for Alternative Finance. Available at: https://ccaf.io/cbnsi/cbeci/comparisons (Accessed: 22 May 2023).
Cruz, G.O.R. (2022) What Is Blockchain?, Money.com. Available at: https://money.com/what-is-blockchain/ (Accessed: 20 May 2023).
Davies, P. (2022) Bitcoin mining is worse for the environment now since China banned it, euronews. Available at: https://www.euronews.com/next/2022/02/26/bitcoin-mining-was-actually-worse-for-the-environment-since-china-banned-it-a-new-study-sa (Accessed: 22 May 2023).
International Finance (2022) How Can Cryptocurrency Reshape the Global Economy?, International Finance. Available at: https://internationalfinance.com/how-cryptocurrency-reshape-global-economy/ (Accessed: 22 May 2023).
Tamny, J. (2021) Bitcoin Won’t Replace The Dollar Because Its Creator(s) Don’t Know What’s Wrong With The Dollar, Forbes. Available at: https://www.forbes.com/sites/johntamny/2021/06/20/bitcoin-wont-replace-the-dollar-because-its-creators-dont-know-whats-wrong-with-the-dollar/ (Accessed: 22 May 2023).
Wendl, M., Doan, M.H. and Sassen, R. (2023) ‘The environmental impact of cryptocurrencies using proof of work and proof of stake consensus algorithms: A systematic review’, Journal of Environmental Management, 326. Available at: https://doi.org/10.1016/j.jenvman.2022.116530
