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How to bring carbon neutrality to cryptocurrency mining?

Photo of: Nathan VDH
by Nathan VDH

Cryptocurrencies, and more broadly FinTech, have a significant card to play in the defense of the environment. However, some mining activities still consume a lot of energy. To amortize the environmental cost, the miners should try to use renewable energies as much as possible. But at present, what is the real share of green energy in mining? Let’s find out from the Cambridge Centre for Alternative Finance (CCAF) study.

The mining of cryptos that use the Proof-Of-Work process is energy-intensive. On a global scale, the energy required for these activities represents the production of several dozen nuclear power plants.

According to the recent CCAF study, it is estimated that 76% of miners (or teams of miners) use renewable energy for their activities. The study goes into more detail and gives the “energy mix” used for mining activities: 62% for hydro, 17% for wind, and 15% for solar.

These encouraging results show that the world of crypto is moving in the right direction. However, when looking at the study in detail, it is clear that these figures should be put into perspective. First of all, although hydropower is renewable, it is not easily accessible. Indeed, not all countries can invest in this type of energy because it is primarily a question of geography.

Moreover, the figure of 76% concerns miners who use renewable energy at certain times during their activity. In other words, these 76% of miners do not use green energy permanently for their activity. In fact, the study estimates that only 39% of the total energy used for mining purposes would come from renewable energy.

This is easily understood when these figures are put into perspective. More than half of the miners are located in China. The country’s landscape lends itself well to hydropower. This is particularly the case in the Sichuan or Yunnan regions. During the rainy season, the electricity produced is sold about 30% cheaper. As a result, there is a significant migration of miners to these areas. However, in the dry season starting in November, miners’ teams move to other areas to find a cheaper rate. They then go to Mongolia or Xinjiang, which offer cheaper energy from coal-fired power plants!

There is therefore a seasonality (linked to a windfall effect) in terms of the type of energy used by the miners for their activity. While the figures put forward by the CCAF are positive, in reality, there is still a long way to go. Initiatives such as the one launched by Ripple on September 30 will undoubtedly further encourage the crypto industry to embrace green energy. They have announced that they were looking to be carbon neutral by 2030.