Monetary price of health and
air quality impacts
November 13, 2019
University of New Mexico
Bitcoin, Ethereum, Litecoin
and Monero -- the names of digital-based 'cryptocurrencies' are being heard
more and more frequently. But despite having no physical representation, could
these new methods of exchange actually be negatively impacting our planet? It's
a question being asked by researchers who are investigating the environmental
impacts of mining cryptocurrencies.
Bitcoin, Ethereum, Litecoin
and Monero -- the names of digital-based 'cryptocurrencies' are being heard
more and more frequently. But despite having no physical representation, could
these new methods of exchange actually be negatively impacting our planet? It's
a question being asked by researchers at The University of New Mexico, who are
investigating the environmental impacts of mining cryptocurrencies.
"What is most striking
about this research is that it shows that the health and environmental costs of
cryptocurrency mining are substantial; larger perhaps than most people
realized," said Benjamin Jones, UNM Researcher and asst. professor of
economics.
Cryptocurrency is an
internet-based form of exchange that exists solely in the digital world. Its
allure comes from using a decentralized peer-to-peer network of exchange,
produced and recorded by the entire cryptocurrency community. Independent
"miners" compete to solve complex computing algorithms that then
provides secure cryptographic validation of an exchange. Miners are rewarded in
units of the currency. Digital public ledgers are kept for "blocks"
of these transactions, which are combined to create what is called the
blockchain. According to proponents, cryptocurrencies do not need a third
party, or traditional bank, or centralized government control to provide secure
validation for transactions. In addition, cryptocurrencies are typically
designed to limit production after a point, meaning the total amount in
circulation eventually hits a cap. These caps and ledgers are maintained
through the systems of users.
But the mechanisms that make
these currencies so appealing are also using exorbitant amounts of energy.
In a new paper titled 'Cryptodamages:
Monetary value estimates of the air pollution and human health impacts of
cryptocurrency mining' published in the journal, Energy Research &
Social Science, University of New Mexico researchers Andrew Goodkind (asst.
professor, Economics), Benjamin Jones (asst. professor, Economics) and Robert
Berrens (professor, Economics) estimate the environmental impact of these
cryptocurrency mining techniques. Using existing data that assessed energy use
on cryptocurrency, and a battery of economic valuation techniques, the three
were able to put a monetary figure on the mining practices.
"Our expertise is in
estimating the monetary damages, due to health and environmental impacts, of
different economics activities and sectors," Berrens explained. "For
example, it is common for economists to study the impacts from energy use
connected to production and consumption patterns in agriculture, or with
automobile production and use. In a world confronting climate change,
economists can help us understand the impacts connected to different activities
and technologies."
The independent production, or
'mining', practices of cryptocurrencies are done using energy-consuming
specialized computer hardware and can take place in any geographic location.
Large-scale operations, called mining camps, are now congregating around the
fastest internet connections and cheapest energy sources -- regardless of
whether the energy is green or not.
"With each
cryptocurrency, the rising electricity requirements to produce a single coin
can lead to an almost inevitable cliff of negative net social benefit,"
the paper states.
The UNM researchers argue that
although mining practices create financial value, the electricity consumption
is generating "cryptodamages" -- a term coined to describe the human
health and climate impacts of the digital exchange.
"We looked at climate
change from greenhouse gas emissions of electricity production and also the
impacts local air pollutants have when they are carried downwind and across
local communities," Goodkind said.
The researchers estimate that
in 2018, every $1 of Bitcoin value created was responsible for $.49 in health
and climate damages in the United States.
Their data shows that at one
point during 2018, the cost in damages that it took to create Bitcoin matched
the value of the exchange itself. Those damages arise from increased pollutants
generated from the burning of fossil fuels used to produce energy, such as
carbon dioxide, fine particulate matter, nitrogen oxides and sulfur dioxide.
Exposure to some of these pollutants has been linked to increased risk of
premature death.
"By using large amounts
of electricity generated from burning fossil fuels," Jones said.
"Cryptocurrency mining is associated with worse air quality and increased
CO2 emissions, which impacts communities and families all across the country,
including here in New Mexico."
In addition to the human
health impacts from increased pollutants, the trio looked at the climate change
implications and how the current system of mining encourages high energy use.
"An important issue is
the production process employed in the blockchain for securing new blocks of
encrypted transactions," Berrens explained. "Along with supply rules
for new units of a currency, some production processes, like the predominate
Proof-of Work (POW) scheme used in Bitcoin, require ever increasing computing
power and energy use in the winner-take-all competition to solve complex
algorithms, and secure new blocks in the chain."
Although relatively limited in
overall use currently, there are cryptocurrencies with alternative production
schemes which require significantly less energy use. The researchers hope by
publicizing the health and climate impacts of such schemes, they will encourage
alternative methods of mining.
"The ability to locate
cryptomining almost anywhere (i.e. following the cheapest, under-regulated
electricity source) ...creates significant challenges to implementing
regulation," the paper says.
Goodkind says the specialized
machines used for mining also have to kept cool, so they won't overheat while
computing such complex algorithms. That additional energy-use was not part of
this study, which means even more energy is being consumed than is currently
being accounted for when looking solely at the usage of running the machines.
Moving forward, the
challenging public policy question is: "How can you make the people who
are creating the damage pay for the cost, so that it is considered in the
decision in how to mine cryptocurrencies," Goodkind concluded.
Story Source:
Materials provided by University of New Mexico.
Original written by Rachel Whitt. Note: Content may be edited for style
and length.
Journal Reference:
Andrew L. Goodkind, Benjamin
A. Jones, Robert P. Berrens. Cryptodamages: Monetary value estimates of
the air pollution and human health impacts of cryptocurrency mining. Energy
Research & Social Science, 2020; 59: 101281 DOI: 10.1016/j.erss.2019.101281
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