Cryptocurrency proponents and advocates promote the benefits of using digital currency, since its lack of physical existence does not require third party involvement such as traditional banks and government regulators. That being the case, digital currency transactions will not be subject to bank charges and related government taxes.
Cryptocurrency exchanges merely work by way of peer-to-peer communication within a community of digital currency players; using encrypted messages recorded in a ledger known as blockchain. A unit of digital currency is produced every time a cryptocurrency miner solves a block of complex computing algorithms, which serves as a validation of every digital exchange.
Since a unit of digital currency is created as a reward for the miner who solves a block of algorithms, miners compete in order to earn the right to produce a unit of digital currency, ahead of the others. .
Yet University of New Mexico (UNM) researchers (UNM) argue that the mining practices present potential damage to human health, as well as add to the worsening effects of climate change.
According to UNM Economics assistant professors Andrew Goodkind and Benjamin Jones, and Economics professor Robert Berrens, there are financial values attached to the air pollution and adverse human health impact brought about by the electricity consumed in mining for cryptocurrency.
Using their expertise and a host of economic valuation techniques, the three economics professors were able to estimate the financial equivalent of the damages caused by cryptocurrency exchanges.
How Cryptocurrency Mining Causes Environmental Harm
Professor Berrens elaborated on a particular issue in the blockchain process of decoding new blocks of encrypted transactions. He pointed out the supply rules that a miner needs to comply with in order to create and earn new units of digital currency. Such rules include the predominant Proof-of Work (POW) scheme employed in solving encryptions linked to digital transactions.
Completing a POW requires a continuously increasing use of computing power and energy to solve complex algorithms under a winner-take-all scheme, which basically, is also a competition to secure new blocks in the cryptocurrency exchange chain.
Their study revealed that in cryptocurrency-mining, independent production of cryptocurrencies use specialized computer hardware that requires intensive use of electricity. Large-scale crypto-mining operations in so called mining camps therefore, use many of those energy-consuming computer hardware. Mining camps are usually established in any geographic locations across the globe, where energy source is cheapest and where Internet connection is the fastest.
In their research paper published in the “Energy Research & Social Science” journal, titled as “Cryptodamages: Monetary Value Estimates of the Air Pollution and Human Health Impacts of Cryptocurrency Mining,” the UNM researchers stated that the rising electricity required by every crypto coin generated, regardless of whether energy used is green or not, can result in inevitable cliffs of adverse net social benefit. Assistant Professor Goodkind said,
“We looked at greenhouse gas emissions of electricity used in mining, and their effect on climate change, as well as the impacts of local air pollution when carried downward, across local communities.”
The Monetary Values of the Cryptodamages as Assessed by the UNM Economics Researchers
The UNM researchers looked into large amounts of electricity produced by burning fossil fuels. The data gathered shows that at one point in 2018, the equivalent cost of damages that resulted in connection with Bitcoin production, matched the monetary value of the cryptocurrency exchange itself.
Increased pollutants such as fine particulate matter, CO2, nitrogen oxides and sulfur dioxide produced by burning fossil fuels to generate electricity, likewise heightened exposure to elements that increased risks of premature death.
The UNM researchers approximated that in 2018, every one dollar worth of Bitcoin created yielded an equivalent cost of $49 in climate and human health damages across the United States. The huge amounts of electricity used by cryptocurrency mining camps showed links to the increased CO2 emissions and worsening air quality that affected families in communities across the country, including those in the state of New Mexico.
In publicizing the related costs of health and adverse climate impacts caused by such mining schemes, the UNM researchers hope that operators of cryptocurrency camps will seek alternative low-energy methods of mining.