Digital assets blamed for impact on climate

Saturday October 15 2022
A bitcoin mining data centre

A bitcoin mining data centre in North Texas. Concerns are rising about the energy intensive process needed to mine cryptos. PHOTO | AFP


Concerns are mounting over the energy consumption, environmental pollution and greenhouse gas emissions arising from the mining and trade of digital assets.

Available statistics indicate that crypto assets gobble between 120 and 240 billion kilowatt hours of electrical energy annually, way more than the total energy consumed across East Africa, currently estimated at 25.17 billion kilowatt hours (kWh).

Cryptocurrency activity is estimated to consume up to 0.9 percent of the global total energy consumption and contributes to about 0.3 percent of global greenhouse gas emissions, pointing to how much could be saved if crypto activities were severed.

Consequently, the total carbon dioxide (CO2) emissions resulting from cryptocurrency mining and trading is estimated to be 71.86 metric tons, according to Digiconomist, a platform that tracks the impacts of digital trends.

In East Africa, CO2 emissions, according to data aggregator WoldData, is estimated to total to just about 45.85 metric tons.

Regulators who have lately been concerned purely with the effect of cryptocurrencies on financial markets and their threat to countries’ monetary sovereignty are now questioning the magnitude of their contribution to global warming and how to mitigate it.


A report by the US White House Office of Science and Technology Policy has recommended a number of regulations to ensure “responsible development of digital assets” in a manner that is energy efficient and minimises greenhouse gas emissions.

Developing standards

The White House recommends that regulators develop environmental performance standards for the crypto industry to ensure minimal environmental impacts.

In the meantime, several enthusiasts and entities in the crypto space are already beginning to shift to more environmental friendly distributed ledger technologies in efforts to reduce their environmental impact.

Ethereum, the second-largest distributed ledger technology, last month transitioned from a proof-of-work (PoW) consensus mechanism to a proof-of-stake (PoS) mechanism, which is more environmental friendly.

Tim Mungai, a Nairobi-based expert in distributed ledger technologies, told The EastAfrican that the PoS consensus mechanism is more energy efficient because it involves a number of ‘validators’ (or investors) who put up money on a network and “whoever has the largest stake stands a greater chance of having their bundle of transactions confirmed.”

“On the contrary, in a PoW mechanism, a group of miners compete to solve a complex math problem using a lot of electricity with the sole purpose of getting their transactions confirmed and recorded in the network,” he said.

Those shifting

With the migration to PoS consensus mechanism, Ethereum, which accounts for about 20 percent of crypto energy consumption, is set to reduce significantly the amount of electricity consumed by the digital assets and their consequent CO2 emissions.

There are also other distributed ledger technologies that have already adopted the proof-of-stake consensus mechanism to lower energy consumption. The most popular one is Hedera Hashgraph, initially released in 2017.

According to Digiconomist, Hedera only consumes about 0.001 kWh of electricity per transaction, while Bitcoin – the largest cryptocurrency – consumes up to 1389.93 kWh of electrical energy per transaction.

Mungai, who is also a crypto enthusiast, told The EastAfrican that he migrated to Hedera as soon as he realised its energy efficiency and is already developing a digital wallet for its native coin Hbar.

“We only have one planet and we have to be wise on how we use our resources,” he said.

“Any crypto enthusiasts, holders or developers who care about the environment should be concerned with their energy consumption and environmental impact.”