Bitcoin, Ephemeral, Dogecoin. Like the rampant rise of technologies that have come before it, cryptocurrency continues its unabated rise into mainstream commerce through an endless proliferation of offshoots appealing to eager consumers. Despite a rocky start, and continued volatility in the marketplace, cryptocurrency looks here to stay; its market cap recently rose past $2 trillion – close to the size of the UK economy – as it becomes the established alternative to central bank-led fiat currency.
Yet that decentralization – and lack of regulation – has inevitably induced extenuating damage; crypto mining has a notoriously large carbon footprint – given the energy-intensive mathematical calculations that go into the production of each new coin – with electricity consumption for Bitcoin mining exceeding the usage of many medium-sized countries – including Argentina. That is exacerbated by transaction-based electricity consumption which dwarfs those of credit card payments.
Whether the market can address this newfound pollution is uncertain – promisingly, there is a growing collection of sustainable cryptocurrencies; SolarCoin generates one coin for every solar-generated Megwatt hour; the crudely named BitGreen ‘pays’ for environmentally and socially friendly behaviour, incentivising actions like carpooling or volunteering. But these currencies are niche and tied down in bureaucracy – factors which inevitably hurt their potential as a serious cash alternative – while their appeal is to the socially rather than financially minded, shortening their horizon.
Instead, hope lies in making established currencies like Bitcoin and Ephemeral more sustainable, if not totally carbon neutral. There are signs this is occurring; a recent Cambridge University study found that 39% of the Bitcoin network is powered from renewable sources. Action is underway to bring that number up – private sector-led initiatives are pre-empting government intervention and public backlash, with the Crypto Climate Accord (CCA) recently launching with 40 organizational supporters and the goal to reach 100% renewably powered coins by 2025.
If that happens, the pieces are there to make cryptocurrency a leader in sustainable investment and development. Its signature trait of scarcity is vitally important in developing markets with weak institutions – the historic hyperinflation of Zimbabwe and Venezuala would be largely non-existent under Bitcoin – while its traceability exposes harmful supply chains too often masked in the cash-driven shadow economy.
To reach sustainability, mainstream cryptos have some way to go. Their volatility has proven harmful to both the holder and the environment – Musk’s joke-led Dogecoin sores and plummets in value at the behest of the creator’s Twitter account, and so too do environmentally damaging speculation-driven transactions. For now, that volatility can only be curbed by consumers, with longer term uptake at Government level blunting the edges of market shocks and guerrilla trading.
That leads into the second requirement: political buy-in. Governments have been wary of cryptocurrency’s growth, in the process turning a blind eye to its potential benefits and harm. The sooner it is taken seriously, the sooner that blockchain can be factored into international net zero 2050 goals, eventually forming a sustainable cornerstone of the modern financial ecosystem.