In my attempt to reduce my own carbon footprint, diet has been the low-hanging fruit I reached for first. But other parts of daily routine have also allowed painless reductions. I remain culpable on too many fronts, and had hoped for an explanation of the environmental issues around cryptocurrency that I could understand; Elizabeth Kolbert is the perfect person to provide it:
Cryptocurrency mining uses huge amounts of power—and can be as destructive as the real thing.
Money, it’s often said, is a shared fiction. I give you a slip of paper or, more likely these days, a piece of plastic. You hand me eggs or butter or a White Chocolate Mocha Frappuccino, and we both walk away satisfied. With cryptocurrency, the arrangement is more like a shared metafiction, and the instability of the genre is, presumably, part of the thrill. Dogecoin, a cryptocurrency that was created as a spoof, has risen in value by eight thousand per cent since January, owing to a combination of GameStop-style pumping and boosterish tweets from Elon Musk. On Tuesday, which backers proclaimed DogeDay, the cryptocurrency was valued at more than fifty billion dollars, which is more than the market cap of Ford. Coinbase, a cryptocurrency exchange, went public last Wednesday; almost immediately, it became worth more than G.M.
The mainstreaming of cryptocurrency, as it’s been called, is obviously a big deal for the world of finance. It’s also a big deal for the world of, well, the world. This is particularly true in the case of the ur-cryptocurrency, Bitcoin. Like Dogecoin, bitcoin has recently surged in value. In April, 2020, a coin was worth about seven thousand dollars; today, it’s worth more than fifty-five thousand. (It hit a record high of $64,895.22 on April 14th, but has since fallen off.) As the cost of investing in bitcoin has soared, so, too, has the potential profit in “mining” it. Bitcoin mining is, of course, purely metaphorical, but the results can be every bit as destructive as with the real thing.
According to the Cambridge Bitcoin Electricity Consumption Index, bitcoin-mining operations worldwide now use energy at the rate of nearly a hundred and twenty terawatt-hours per year. This is about the annual domestic electricity consumption of the entire nation of Sweden. According to the Web site Digiconomist, a single bitcoin transaction uses the same amount of power that the average American household consumes in a month, and is responsible for roughly a million times more carbon emissions than a single Visa transaction. At a time when the world desperately needs to cut carbon emissions, does it make sense to be devoting a Sweden’s worth of electricity to a virtual currency? The answer would seem, pretty clearly, to be no. And, yet, here we are.
The Greenidge Generating Station in Dresden, New York, sits on the shores of Seneca Lake, about an hour southeast of Rochester. It was originally built in the nineteen-thirties to run on coal; over the decades, new units were added and older ones shuttered. The power station ceased operations in 2011, and it sat idle until it was purchased by a private-equity firm and converted to run on natural gas. In 2017, under the ownership of Greenidge Generation Holdings, the plant reportedly began operating as a “peaker plant,” to provide power to the grid during times of high demand. (A spokesperson noted that the plant “is permitted to run 24/7.”) Then, in 2019, it was announced that the plant would power bitcoin mining.
Mining is the process by which bitcoin is both created and accounted for. Instead of being cleared by, say, a bank, bitcoin transactions are recorded by a decentralized network—a blockchain. Miners compete to register the latest “block” of transactions by solving cryptographic puzzles. The first one to the solution is rewarded with freshly minted bitcoin. Miners today receive 6.25 bitcoins per block, which, at current values, are worth more than three hundred thousand dollars.
It’s unclear exactly who dreamt up bitcoin, so no one knows what this person (or persons) was thinking when the mining protocols were first established. But, as Ari Juels, a computer scientist at Cornell Tech, recently explained to me, the arrangement seems to have been designed with equity in mind. Anyone devoting a processor to the enterprise would have just as much stake in the outcome as anyone else. As is so often the case, though, the ideal was soon subverted.
“What was quickly discovered is that specialized computing devices—so-called mining rigs—are much, much more effective at solving these puzzles,” Juels said. “And, in addition, there are economies of scale in the operation of these mining groups. So the process of mining, which was originally conducted by a loose federation of presumably individual participants with ordinary computing devices, has now become heavily consolidated.”…
Read the whole essay here.