The Virtual Coal in Your Stocking

A Christmas stocking, filled with coal and gold coins with the Bitcoin symbol on them.

If you are think­ing about hol­i­day gifts this month, be care­ful about cryp­tocur­ren­cy mined with coal. Cryp­tocur­ren­cy is a vir­tu­al cur­ren­cy that has been get­ting increas­ing lev­els of neg­a­tive atten­tion due to envi­ron­men­tal harms asso­ci­at­ed with how it is mined.”

Cryp­tocur­ren­cy isn’t mined like gold or oth­er min­er­als — in fact, the most com­mon method uses com­put­ers. Envi­ron­men­tal con­cerns par­tic­u­lar­ly lie with the proof of work” cryp­tocur­ren­cy min­ing method. This is cur­rent­ly the most com­mon­ly used method and is used with pop­u­lar cur­ren­cies, such as Bit­coin. This method requires min­ers” to com­plete cryp­to­graph­ic puz­zles to claim a blockchain. Com­plet­ing those puz­zles and keep­ing oth­ers from claim­ing the blockchain requires hav­ing more com­put­ing pow­er than a com­peti­tor, and so this method is incred­i­bly ener­gy inten­sive. Due to the finite nature of Bit­coin, it was designed so that the more min­ers” there are, the hard­er and more ener­gy inten­sive the puz­zles become. Esti­mates put glob­al annu­al ener­gy use for Bit­coin at almost three times that of Ama­zon, Apple, Face­book, Google, and Microsoft com­bined, or approx­i­mate­ly the same amount that the state of Wash­ing­ton uses in a year. 

Not only does this elec­tric­i­ty usage cre­ate cli­mate and air pol­lu­tion, but it can also affect the make­up of the pow­er sec­tor, as fos­sil fuel plants are kept online or even restart­ed specif­i­cal­ly to sup­port cryp­tocur­ren­cy min­ing. The Greenidge Gen­er­at­ing Sta­tion, for exam­ple, is a for­mer coal plant that was pur­chased by a pri­vate equi­ty firm and con­vert­ed to run on nat­ur­al gas as a peak­er plant. Chang­ing eco­nom­ic con­di­tions decreased demand for the plant as an elec­tric­i­ty source, so the busi­ness mod­el piv­ot­ed to cryp­tocur­ren­cy min­ing fueled by the gas gen­er­a­tion. The New York State Depart­ment of Envi­ron­men­tal Con­ser­va­tion is cur­rent­ly con­sid­er­ing a renew­al of Greenidge’s Clean Air Act per­mit and com­pli­ance with New York’s Cli­mate Lead­er­ship and Com­mu­ni­ty Pro­tec­tion Act, but that review remains pend­ing (with a deci­sion expect­ed any day now). 

The addi­tion­al con­sump­tion of the min­ing can also dri­ve up rates for elec­tric­i­ty cus­tomers as demand grows. In response to that con­cern, the city of Platts­burgh, NY, had a tem­po­rary mora­to­ri­um on cryp­tocur­ren­cy oper­a­tions, and the city secured a rid­er from the New York Pub­lic Ser­vice Com­mis­sion to ensure that res­i­den­tial cus­tomers were not sad­dled with high­er costs due to the min­ing oper­a­tions. Oth­er locales will have to grap­ple with these rate and envi­ron­men­tal impacts, as util­i­ties and firms beyond New York are eye­ing Bit­coin min­ing as a way to ensure their fos­sil gen­er­a­tion is profitable. 

And proof of work cryp­tocur­ren­cy min­ing can be so ener­gy inten­sive that it threat­ens to make cur­rent plans for renew­able growth insuf­fi­cient to help decar­bonize the grid. For exam­ple, Swedish offi­cials recent­ly explained that even where min­ers use renew­able ener­gy, exten­sive cryp­tocur­ren­cy min­ing could dri­ve ener­gy demand to out­pace the growth in renew­able ener­gy need­ed to tran­si­tion away from fos­sil fuels more broadly. 

In addi­tion to the harms asso­ci­at­ed with increased elec­tric­i­ty con­sump­tion, the elec­tron­ic waste from the exten­sive hard­ware need­ed for proof of work min­ing is stag­ger­ing. One esti­mate is that gen­er­at­ing one Bit­coin cre­ates the same e‑waste as throw­ing out two iPhones. 

Beyond envi­ron­men­tal issues, scams are also a con­cern. Bit­coin has been sub­ject to state attor­ney gen­er­al action to pro­tect against fraud on the unreg­u­lat­ed plat­forms.

There are oth­er, less ener­gy-inten­sive meth­ods of min­ing cryp­tocur­ren­cy. For exam­ple, proof of stake” is an alter­nate sys­tem of com­plet­ing these trans­ac­tions that uti­lizes over 99% less ener­gy. Ulti­mate­ly, the envi­ron­men­tal and con­sumer impacts of proof of work cryp­tocur­ren­cy min­ing require scruti­ny. So stay on the nice list this hol­i­day sea­son to avoid that vir­tu­al lump of coal.