In a classic case of over-simplification, cryptocurrency mining has been getting a bad rap lately...

You've probably read it - the current quantity of annual energy consumed to mine cryptocurrency globally equals the energy consumption of the country of Denmark (if you haven't read it, you can in this article). That sounds like an awful lot of energy, doesn't it? Seems pretty bad for the environment, consuming all that electricity...

It's true. Mining cryptocurrency does consume a considerable amount of electricity. But, there are a few key problems with taking this information and making a case against cryptocurrency with it.

The environmental impact of mining depends a great deal on how you get the energy you consume.

Miners have recently been flooding (heh) to Quebec, Canada to take advantage of cheap electricity, offered by the province's hydro-electric system. This renewable energy, drawn from turbines propelled by falling water, has minimal environmental impact, other than the dams themselves causing changes to the environment back when they were built.

It reminds me of people who proudly drive their electric cars in the hopes of protecting the environment, but then plug the car in to draw electricity from their nearby coal plant. The electric car is causing more harm than good unless the electricity it draws from is clean in the first place. Not only that, the whole process of creating batteries for electric cars is environmentally devastating. But that's another story for another day.

If miners are drawing from clean, renewable electricity, the environmental impact is negligible. This, of course, varies greatly around the world and totally depends on where and how a region gets its electricity.

Other methods of operating a financial system also have a large environmental impact.

Banks and the current financial system require the production of printed money. This process takes energy. Mints consume a great deal of energy. Moving money from one financial institution to another consumes energy and causes considerable pollution. Dropping off money or withdrawing cash at a bank machine consumes energy. Storing bank data on huge centralised servers running 24/7 consumes a massive amount of energy. It's pretty hard to calculate how much energy this whole financial system consumes and how much pollution is caused, but I think it's fair to say it's probably, at the very least, equivalent to cryptocurrency mining relative to the amount of money being processed.

For a detailed breakdown of the energy and environmental costs of printing and minting fiat currency, give this article a read. Here's a sampling from the article that breaks down the environmental costs of just printing USD paper cash on an annual basis:

Water Use During Paper Making: 1 million gallons / day = 1.4 billion litres per year

Water Use During Printing: 250,000 gallons / day = 0.35 billion litres per year

Waste Ink & Pulp Sludge = 6 million pounds = 2720 tonnes

Electricity Use During Printing: 97850 MWH of electricity = 0.35 million GJ

Electricity Use for Pulp Making = Same as electricity used during printing = 0.45 million GJ

Ink Usage = 3540 tonnes

Over 7100 tonnes of cotton

Over 2300 tonnes of linen

We're talking a lot of costs here, not just electricity - and keep in mind, fiat paper cash only lasts for a few years before it needs to be printed again.

Traditional mining of metals not only consumes a huge amount of energy, it also causes far greater environmental damage through the process of mining itself.

Mining metals is extremely damaging to the environment and consumes truly huge quantities of energy. Not only that, mining metals also leaves behind large quantities of toxins, such as mercury left in the atmosphere and nitrates left in groundwater. Gold mining in the developing world, for example, is the number one source of mercury pollution in the world, according to the EPA (www.washingtonpost.com). This form of mining also leaves behind large portions of unusable, damaged land in many cases. If you want to find out more details about the environmental costs of gold mining, check out this article.

So, is cryptocurrency mining really as terrible as it's made out to be in the news? I would suggest it is a far better form of money production that would cause far less environmental damage, when fairly considering all the factors.

And that's the trick: Considering all the factors. Not easily done when it's easier to make an exciting headline about cryptocurrency mining using as much electricity as the country of Denmark. Keep this in mind next time someone bemoans the environmental cost of cryptocurrency mining - after all, it seems to actually be better for the environment than the old financial system.

sources:

http://www.washingtonpost.com/wp-dyn/content/article/2010/09/20/AR2010092004730.html

https://www.thenational.ae/business/technology/why-cryptocurrency-mining-is-an-environmental-hazard-1.690059

https://www.coindesk.com

image source:

https://www.mekongeye.com/2016/10/13/environmental-destruction-is-a-crime-vietnamese-industry-minister/