There is little doubt that Bitcoin has brought about a financial revolution. But is it also contributing to an environmental disaster?
The ecological impact of Bitcoin and other coins that rely on proof-of-work mining is startling, with the Bitcoin Energy Consumption Index reporting that one single transaction uses energy equivalent to the power consumption of an average U.S. household over 75.16 days.
There is a depressing irony to the commonly-held hope that crypto will upend the global financial order and finally bring fairness to human civilization - because in doing so it could play a part in our ultimate demise.
“The digital infrastructure behind the most popular cryptocurrency, Bitcoin, currently requires as much energy as the whole of Thailand, with a carbon footprint exceeding the gold mining industry,” academics wrote in a research paper published at the end of 2021.
“Should Bitcoin’s mass adoption continue, an escalating climate crisis is inevitable, disproportionately exacerbating social and environmental challenges for communities already experiencing multiple dimensions of deprivation. The unsustainable trajectory of some cryptocurrencies disproportionately impacts poor and vulnerable communities where cryptocurrency producers and other actors take advantage of economic instabilities, weak regulations, and access to cheap energy and other resources.”
Better Than Bitcoin?
It must be remembered that crypto is not Bitcoin. Today, a lot of the sector’s greatest minds are working to create blockchain-based currencies that do not require the resource-heavy computations needed to process proof-of-work transactions.
One of these is Chia, which Bram Cohen, the inventor of BitTorrent, launched in 2017. It uses a poetically-named Nakamoto consensus mechanism called Proof of Space and Time which requires people involved in proving transactions to allocate unused hard drive space.
Chia (XCH) is currently worth $85.20 per token and has experienced a slow price bleed since last July, following a massive crash that saw it plummet from a high of more than $1,600 in May to less than $260 just over a month later.
This system has a friendly language of “plots” and “farmers”. Users of the Chia blockchain “seed” unused space on their hard-disk drive by installing software that stores a collection of cryptographic numbers which serve as plots.
Each user acts as a farmer. When the blockchain broadcasts a challenge for the next block that needs to be validated, the farmers scan their plots to see if they have a hash that is closest to the challenge.
Farmers’ probability of winning a block is related to the total percentage of the total space they have when compared to the entire network.
This process uses lower amounts of energy than Bitcoin, making Chia less environmentally damaging than proof of work cryptocurrencies.
Green Is the Color of Money
Its alleged green credentials have won Chia some big supporters. It raised $61 million in a Series D funding round last year and achieved a valuation of $500 million. The World Bank also chose Chia to develop a prototype model for its Climate Warehouse project which will “facilitate the transparent sharing and reporting of climate project information and its issuances”.
“Chia has a new innovative Nakamoto consensus algorithm that removes the energy demands of Proof of Work from the system,” Chia wrote. “Compared to other cryptocurrencies, Chia has significantly better security due to its more decentralized blockchain.”
Chia has adopted new cryptographic tools to “enable richer smart transaction capabilities” as well as pioneering a ”new and superior approach to funding, building, and supporting a blockchain” and implementing measures that “ease the volatility of the coin to mitigate bubbles and crashes and to drive adoption of chia”.
It can even be mined on Amazon Web Services, meaning farmers don’t need to buy their own virtual land and can instead camp on Jeff Bezos’ epic virtual estate.
Which sounds a lot like feudalism - the old European social model in which peasants lived like slaves on their master’s land.
There are several quite important downsides to Chia, meaning it may not be as virtuous as it appears.
Firstly, Chia tends towards centralization. At the time of writing, the top farmer on the blockchain has won just over 20% of the last 10,000 blocks to be created.
There is a risk that Proof of Space and Time concentrates all the rewards at the top of the food chain and holds them there, whilst everyone at the bottom scrambles for scraps.
Chia is also resource-heavy. It requires less electricity than Bitcoin, but still uses a large amount of energy due to the CPU computations needed to enable farming.
A Hard Time For Hard Drives
Chia has also sparked a rush for SSD drives and may wear out these storage devices extremely quickly. Some manufacturers have reportedly refused to honor warranties on SSD disks that have been used to farm Chia.
“In normal usage, a modern SSD will last over a decade; an SSD that’s plotting chia may burn out in less than six weeks,” author David Gerard wrote in Foreign Policy. “Instead of carbon dioxide, Chia produces vast quantities of e-waste - rare metals, assembled into expensive computing components, turned into toxic near-unrecyclable landfill within weeks.”
Bram Cohen denied these hugely damaging claims in a series of tweets published last year.
“For some odd reason the 'Chia burns out hard drives!' is getting repeated as the fashionable fud,” he wrote. “This is odd because, for the most part, it's just plain wrong.”
However, he also went on to admit that plotting (setting out space on your hard drive to farm Chia) can indeed be damaging.
He added: “Don't plot with consumer SSD! Or at least, only do a little bit of plotting with each consumer SSD. Also don't clean nonstick pans with steel wool, don't clean vegetables with soap, and don't use your phone as a doorstop. These aren't arguments against steel wool, soap, or phones, they're basic guidelines about using your tools properly.”
So will Chia save the world? Probably not.
