Dusseldorf Cryptocurrencies have been under heavy criticism for some time because large computational capacities are required to process transactions. The electricity needed for this usually comes from power plants that burn fossil fuels. We have compiled data and facts on the complex subject
With the hype of non-fungible tokens (NFTs), these digital proofs of authenticity are even more in the spotlight. Because saving an object, a blockchain database (“minting”) and NFT trading consume energy.
Bitcoin or Ethereum are purely virtual currencies. New digital coins are created by users providing computing power to encrypt and validate transactions. You will be rewarded for this in the respective cyber currency. According to a study by the University of Cambridge and the International Energy Agency IEA, the simple act of “digging” or “mining” Bitcoin consumes as much electricity each year as the Netherlands. Bitcoin proponents counter that the mainstream financial system, with its millions of employees sitting at their computers in air-conditioned offices, also requires large amounts of energy.
With the triumph of cryptocurrencies as an investment or means of payment, their energy needs are increasing sharply. The more active users are, the greater the computational effort to encrypt and validate transactions. For this reason, computer farms with high-performance chips are now used for mining, whereas in the beginning a scrapped PC was usually sufficient.
According to a study by the scientific magazine “Joule”, Bitcoin server farms emit 22 to 22.9 million tons of carbon dioxide annually. This roughly matches emissions from countries like Jordan or Sri Lanka.
THE CURRENCY EVEN RECEIVES ELECTRICITY
NFTs are not “mined” but “monetized”. According to a study by the industry service NFTClub https://nftclub.com, the “strike” alone produces an average of 83 kilograms of CO2. Each bid for this new NFT would add another 23 kilograms. The sale and the transfer add an additional 51 and 30 kilograms respectively. A resale increases the CO2 footprint by 81 kilograms. The “currency” and trade in around two million “Cryptokitties” – virtual kittens that can be cared for and raised in a video game – is responsible for carbon dioxide emissions of 240 million kilograms, the authors continue. To compensate for this, four million trees should be planted.
There are approaches to this. In projects, for example, residential buildings or greenhouses are heated with waste heat from server farms. Some experts also suggest that miners buy emission certificates to compensate. Others point out that every bitcoin can be traced back to the miner. This could then receive a surcharge for “Green Bitcoins” which are obtained using renewable energy.
Some cryptocurrencies take a different approach: instead of millions of computers validating each transaction in a run, one user is automatically selected for this task. This saves time and energy, because only the data packet of the person who calculated the algorithms first is stored in the blockchain.