The large carbon footprint of cryptocurrency mining puts it in the sights of global environmental legislation. A ban on Bitcoin mining, trading, and crypto services was inevitable in China. A special exemption is required to use Bitcoin in the People’s Republic. The Chinese government claims the ban is to lessen Bitcoin’s well-documented climatic effect.
In any case, the Chinese government’s righteous rage against energy-guzzling and carbon-spewing crypto projects that rely on proof-of-work (PoW) crypto security mechanism is only the first shot in an impending global showdown over Bitcoin and other crypto projects. The complicated crypto security mechanism we subsume under “mining.” This is not a struggle that crypto can or will win.
This is a harsh revelation for many Bitcoin holders. Fortunately, there is a helpful comparison, and that is called coal mining. Alternatives are greener, cheaper, more efficient, and more technologically advanced than coal.
Inertia and reluctance to stop mining have masked the entire impact of China’s Bitcoin war.
After the first shock, the US jumped at the chance to become the world’s new mining hub. Kazakhstan and Malaysia are increasing mining activities in Asia, as are Germany and Ireland in Europe and Iran in the Middle East. Crypto mining has created some odd geopolitical bedfellows.
While a colorful and diversified “Bitcoin mining coalition” may reassure some investors, it will not endure. The US cannot compete with China’s low energy prices and cannot maintain its mining dominance. In a similar situation in Ireland. Even for a theocracy, owning a stake in the world’s least sustainable cryptocurrency is politically and socially unacceptable. Malaysia is also vulnerable to extreme weather and increasing sea levels, making it unsuitable for long-term bitcoin mining. These events drastically limit the future of mined cryptocurrencies.
In addition, the fact that a majority of the world’s states and almost all-powerful industrial nations have signed the Paris Climate Agreement does not aid Bitcoin miners. This comes with a solid commitment to reduce carbon emissions and prevent global warming. Bitcoin mining goes against this guarantee. Beyond the Paris Agreement, the EU has its own climate change action plan called the European Green Deal. These global accords drive energy-intensive ventures like Bitcoin mining to the margins.
Many of the countries now mining Bitcoin are authoritarian states experiencing increasing international pressure as well as domestic unrest and discontent. Very few professional crypto investors can bet on the political stability of a dictatorship or autocracy that is dying and aggressively suppressing public opposition. It’s bad for business, awful for the environment.
However, without legal on- and off-ramps for open exchange and mass acceptance, the respective cryptocurrencies will be forever marginalized. Mining will eventually be outdated due to market forces and law enforcement. Why should investors and crypto enthusiasts wait for that?
Mining can stifle the future cryptocurrency economy.
Investments in more advanced and greener crypto initiatives can achieve far more for the emerging digital economy. We can keep loading coal into the old steam locomotive or we can build a bullet train that goes longer and faster. Bitcoin can lower its carbon footprint by employing more renewable energy, say some.
Less than a third of the world’s electricity is currently renewable. This share could give it a veneer of sustainability, but it would be a fig leaf. We should focus on using renewable energy in ways that are truly sustainable. In terms of cryptography, there are various promising and theoretically sound techniques that could provide network PoW-level security.
Being on the political and geographical fringes makes a coinless decentralized and democratic. Even if we ignore the environmental issue, how can we accept cryptocurrency created in dictatorship as an instrument of economic freedom? In terms of money, atmosphere, and appearances, Bitcoin and other mined cryptocurrencies are in decline. It will happen.
So, what drives the mining train? First, we should not underestimate the power of habit and inertia. In 2008, Bitcoin was revolutionary. It ushered in a new digital economy. Proof-of-work was a revelation in terms of decentralization and security, but it was inefficient. Now the bomb goes off.
Mining’s demise will be painful, and no obvious alternative exists. World leaders have gathered enough technology and energy resources to keep cryptocurrency mining for the foreseeable future, and they can pull enough political and economic levers to keep things going. When the institutional crackdown begins, some mining will shift underground, into the realm of organized crime.