Over the past three years, the annual global energy consumption of crypto has increased fourfold and its market cap recently reached $1 trillion according to a research report by Deutsche Bank, CoinDesk reported. Bitcoin’s (BTC/USD) environmental impact in particular remains a key issue for crypto users despite barely warranting a mention at the recent COP26 climate conference.
Single BTC transaction can power average household for 2 months
According to analysts, mining just one bitcoin consumes a larger carbon footprint than nearly two billion Visa transactions. What’s more, a single bitcoin transaction could power the average U.S. household for more than two months.
According to Deutsche Bank, crypto’s carbon footprint could thwart adoption, adding that as of this summer, almost two-thirds of sovereign wealth funds had a policy covering ESG issues (environmental, social and governance).
197 public companies signed the Paris Agreement
Private companies have committed to become carbon neutral, the bank noted. 197 public ones have signed the Paris Agreement, which aims to reduce greenhouse gas emissions. The ultimate goal is to limit rising global temperatures to 2°C. According to a study cited by the bank, Bitcoin mining might result in an increase of that amount in just 30 years.
Regulators are taking action
Some governments, like the Chinese one, are moving to counteract the carbon footprint of mining operations. Given the expanding market value of cryptocurrencies, however, people can be expected to always find a way to mine, exchange, buy, and sell cryptocurrencies, especially if the respective market is not regulated.
Possible approaches to decarbonization
Deutsche Bank lists disincentivizing carbon-fueled mining, a move to renewable energy sources, and a switch from PoW to PoS protocols among the ways to approach crypto decarbonization. Currently just over three-quarters of Bitcoin’s global energy consumption comes from coal and other non-renewable energy sources.
The future of sustainability
Over the past several months, industry players have been looking at ways to address the ESG issues that might be keeping leading institutional investors from embracing bitcoin. Will these efforts make a difference? It’s too early to tell. The mining industry might make small adjustments to cover whale investors or actually reduce its carbon footprint. It can go both ways.
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