Sustainability in Cryptocurrencies: Challenges and Progress

Introduction

In recent years, cryptocurrencies like Bitcoin and Ethereum have evolved from technological curiosities to digital assets of global use and debate. Their growing adoption has put a spotlight not only on their economic impact but also on their environmental sustainability . By sustainability, we refer, in this context, primarily to the ecological and energy impact of these decentralized networks. Can cryptocurrencies coexist with the goals of combating climate change? The question is highly relevant: Bitcoin, the first and largest cryptocurrency, consumes massive amounts of electricity to maintain its operation, which has drawn comparisons to the energy consumption of entire countries. Ethereum, the second-largest cryptocurrency, used to face similar criticism until it implemented recent technological changes to drastically reduce its energy consumption.

In a world increasingly aware of the climate emergency, the debate about the environmental footprint of cryptocurrencies is more pertinent than ever. On the one hand, proponents point to advances and solutions that promise to reduce the ecological impact of these networks. On the other hand, critics warn that, as many cryptocurrencies operate today (especially those based on proof of work ( PoW ), their level of energy consumption and associated emissions is unsustainable in the long term. In this article, we will explore arguments for and against the sustainability of cryptocurrencies, primarily using the cases of Bitcoin and Ethereum as illustrative examples. We will also analyze the proposals and solutions being discussed and implemented to improve the sustainability of this ecosystem—from the transition to more efficient consensus mechanisms such as proof of stake ( PoS ) to the use of renewable energy , technical optimizations, and public policies that seek to mitigate the environmental impact.

The goal is to offer a balanced and up-to-date overview (prioritizing data from 2020 onward) of the challenges cryptocurrencies face in terms of sustainability and the progress made so far. We’ll use simple, accessible language for any interested reader, along with reliable APA 7 references to support key points. Let’s begin by exploring the arguments that suggest cryptocurrencies can indeed be sustainable , or at least are on their way to becoming so, and then contrast them with opposing arguments.

Arguments for the sustainability of cryptocurrencies

Despite the negative reputation that often accompanies Bitcoin and other cryptocurrencies regarding their ecological footprint, there are arguments and evidence in favor of greater sustainability in this area. These arguments point to positive trends and changes that could make cryptocurrencies a more environmentally friendly technology. Both Bitcoin and Ethereum provide examples of how the crypto industry is evolving: Bitcoin showing gradual improvements in efficiency and renewable energy use, and Ethereum taking a radical leap toward a low-power model. Below, we examine these optimistic perspectives.

Growing use of renewable energy in Bitcoin mining

A key point in the debate is what type of energy cryptocurrency miners use . In the case of Bitcoin, the network is secured by the mining process (PoW), where thousands of specialized computers (ASICs) compete to solve calculations. Traditionally, it has been criticized that this activity consumes electricity mostly from fossil fuels, but recent data suggests a gradual transition towards cleaner sources. For example, a 2023 report with the participation of UN scientists found that around 33% of the energy used by Bitcoin mining in 2020-2021 came from renewable sources , mainly hydroelectric (16% of the total), wind (5%), and solar (2%), with ~9% coming from nuclear energy es.cointelegraph.com binance.com . This implies that approximately one-third of the electricity used no longer emitted CO₂, and ongoing efforts by the industry seek to increase that proportion. In fact, entrepreneurs and mining companies have been taking proactive steps to increase their reliance on green energy es.cointelegraph.com binance.com .

Organizations within the sector, such as the Bitcoin Mining Council (BMC) – a voluntary forum of mining companies – argue that the trend is even more pronounced. According to a BMC survey, by mid-2022 the energy mix of global Bitcoin mining reached 59.5% “sustainable energy” (renewables + nuclear) bitcoinminingcouncil.com . This figure (higher than that of the UN report) comes from voluntary data from more than 50% of the Bitcoin network, extrapolated to the rest, and would indicate that the Bitcoin mining industry is one of the most sustainable in terms of its electricity matrix , comparable or even superior to that of many countries bitcoinminingcouncil.com . While this calculation may be biased (since the most aware companies tend to report their data), it shows a change in mentality and practices within the mining community: today there is an economic and reputational motivation to mine Bitcoin with renewable energy. In places like Texas (USA), for example, numerous mining operations are now powered by solar and wind farms combined with the electrical grid; in Nordic countries like Norway and Iceland, nearly 100% of electricity is renewable (hydroelectric and geothermal) and has become an attractive destination for installing mining farms. An illustrative case is Sweden, where Genesis Digital Assets recently opened a mining data center taking advantage of surplus hydroelectric power in remote regions. binance.com . These movements suggest that much of Bitcoin mining is migrating to where energy is cheaper and cleaner , thus reducing its impact per kWh consumed.

In addition to opting for renewable energy, some miners are utilizing energy sources that would otherwise be wasted or cause pollution. A notable example is the use of flare gas from oil wells: instead of releasing or burning this methane gas on-site (contributing to global warming), companies are using it to generate electricity on-site and mine Bitcoin. This not only avoids methane emissions (a greenhouse gas much more potent than CO₂) but also produces economic value from a waste product. Independent studies indicate that harnessing this gas in mining operations could tangibly reduce net emissions from the hydrocarbon industry while simultaneously fueling the Bitcoin network in a carbon-negative manner . Although this is currently a minority practice, it reflects the potential for synergies between cryptocurrency mining and emissions mitigation in traditional sectors.

In short, the arguments in favor highlight that the issue isn’t how much energy is consumed, but where it comes from . If the electricity used by Bitcoin comes mostly from renewable sources or wasted resources, its carbon footprint is drastically reduced . In fact, in a hypothetical future scenario where all mining energy were renewable, the climate debate surrounding Bitcoin would practically disappear (absolute energy use would still be discussed, but not emissions). Although we are still far from that 100%, recent trends show a path toward greener mining, with private initiatives and some public pressure driving the energy transition in the crypto world.

Improving efficiency and technological advancements in Bitcoin

Another reason for optimism is the constant technological advancement that is making energy use more efficient on networks like Bitcoin. The very competitive nature of mining drives participants to maximize their efficiency: that means using the most modern equipment, which provides more computing power with less power consumption. In the last decade, we have seen an exponential evolution in Bitcoin mining equipment: from using home CPUs, to GPUs, then to FPGAs, and finally to state-of-the-art ASICs , designed exclusively for the Bitcoin algorithm (SHA-256). Each new generation of ASICs tends to improve the hash-to-energy ratio. According to analysis by the Cambridge Centre for Alternative Finance (CCAF) , the average efficiency of miners has multiplied in recent years. A 2023 Cambridge report highlighted that, by updating their estimation model, they found an approximate 40% reduction in the energy required to mine the same number of hashes compared to previous assumptions criptonoticias.com . This reflects the fact that mining technology has become much more efficient over time – for example, a modern miner can require something like 25–30 Joules per terahash, compared to 60+ J/TH just a few years ago. Simply put, the Bitcoin network can now be secured with fewer watts per computing unit than before , thanks to improvements in chip design and operations management.

This increase in efficiency means that, even if the total consumption of the Bitcoin network remains high, the amount of activity (computation) obtained for each kWh consumed is greater . In fact, the Bitcoin Mining Council reported a 46% increase in the technological efficiency of the Bitcoin network between the second quarter of 2021 and the same period in 2022 bitcoinminingcouncil.com bitcoinminingcouncil.com . This is due to “advances in semiconductor technology, the rapid expansion of mining in North America (with modern hardware following the exit from China), and the global adoption of more efficient mining techniques,” according to Michael Saylor, one of the founders of the BMC bitcoinminingcouncil.com . In practice, this means that for every gigawatt of electrical power, many more terahashes are mined per second today than a year ago , and so on. Efficiency also improves at the operational level: professional mining farms optimize cooling (some using liquid immersion cooling to reduce the need for air conditioning), group equipment to reduce losses, and generally implement economies of scale that improve the PUE (power usage effectiveness) of their data centers.

One positive side effect of this quest for efficiency is the potential reduction of e-waste over the long term . While rapid equipment obsolescence has been an issue (more on that later), Cambridge noted that in practice ASIC equipment is actually lasting longer than initially anticipated: in its 2023 update, it adjusted the estimated lifespan of Bitcoin miners from a range of 1-3 years to 4-5 years in many cases criptonoticias.com . This suggests that the efficiency gains from new models are no longer as abrupt as they once were, allowing slightly older hardware to remain profitable for longer rather than quickly becoming scrap. In other words, the pace of turnover could be slowing , which would be positive in terms of sustainability (less equipment discarded annually).

Additionally, there are creative innovations to reuse the heat and byproducts of mining . For example, some facilities in cold climates channel the heat generated by ASICs to heat greenhouses, farms, or even homes. In this way, the consumed electrical energy produces a double benefit: it secures the cryptocurrency network and heats spaces , reducing the need for traditional heating. Startups in Canada and Europe have experimented with home “heaters” that are actually silent Bitcoin miners: the electricity heats the house while mining a few satoshis. If such schemes are scaled, harnessing waste heat could significantly improve the net energy efficiency of mining (reducing waste).

software perspective , it can be argued that cryptocurrencies are increasing their functional efficiency . In Bitcoin, although transaction capacity on the main chain is limited, second-layer solutions such as the Lightning Network have been implemented to process thousands of transactions per second off-chain, at minimal additional energy cost. The Lightning Network allows many payment transactions between users to occur without having to record each one on the Bitcoin blockchain, which is the energetically expensive operation. Thus, with practically the same fixed consumption as the base network, many more total transactions can be carried out , improving the ratio of energy consumed per transaction. This addresses the frequent criticism that “a Bitcoin transaction consumes a household’s electricity for X days”; with the adoption of Lightning or other improvements, that average per transaction decreases. Similarly, in Ethereum (even before switching to PoS) the use of “rollups” or other scaling solutions was encouraged that group hundreds of transactions into a single proof published on the chain, multiplying the efficiency of the use of each block. Everything points to the fact that technical scalability can mitigate relative energy inefficiency , especially in PoW networks like Bitcoin, by increasing the utility obtained per joule consumed.

In short, proponents of sustainable cryptocurrencies argue that technology is rapidly advancing to reduce the impact per unit of value transferred or security provided . Bitcoin has become more efficient, and its miners are more aware of the source of their electricity; additionally, innovative solutions are making better use of the energy used. If these trends continue, the environmental footprint per transaction or per dollar of cryptocurrency capitalization could continue to decline over time , approaching acceptable levels.

Drastically reducing the impact on Ethereum with Proof of Stake

While Bitcoin has shown gradual improvements, Ethereum exemplifies a massive leap in sustainability achieved through a deliberate shift in its fundamental technology. Ethereum, until 2022, also used proof of work to validate transactions, which meant it had thousands of miners (primarily using GPUs) consuming large amounts of electricity. It is estimated that between 2015 and 2022, the Ethereum network consumed a total of about 58 TWh of electricity , comparable to the electricity consumption of Switzerland for a year coindesk.com . In 2021 alone, during the cryptocurrency and NFT boom, Ethereum consumed on the order of 20–30 TWh annually, approaching half of Bitcoin’s consumption at the time. This level of energy use also entailed significant carbon emissions, depending on the energy sources powering the miners (many were in countries with fossil fuels). In fact, the rise of NFTs in 2021 sparked criticism from artists and creators concerned about the energy required to mint coins on Ethereum coindesk.com , leading some to boycott these platforms until they became more environmentally friendly.

Aware of this problem, Ethereum developers had been planning for years a transition to a much more energy-efficient consensus method: proof-of-stake (PoS) . Finally, in September 2022, Ethereum carried out a historic upgrade known as “The Merge,” in which it completely disconnected the PoW mining system and switched to relying on validator nodes that operate with PoS. The result was a spectacular drop, of more than 99.9%, in the energy consumption of the Ethereum network cointelegraph.com coindesk.com . To visualize this change: before the Merge, Ethereum consumed an amount of electricity equivalent to the height of the London Eye (135 meters) in the Cambridge analogy; after the Merge, its consumption was reduced to the size of a raspberry in the same analogy coindesk.com . In numerical terms, the Ethereum Foundation and others estimated that Ethereum went from consuming several terawatt-hours per year to just about 0.01 TWh (a few gigawatt-hours) per year after the transition (a ~99.95% reduction) cointelegraph.com coindesk.com . The Cambridge CCAF estimated that Ethereum now consumes about 6.6 GWh per year , an amount of energy so low that it is comparable to the amount of energy the Eiffel Tower uses in a year for its lighting coindesk.com . Ethereum has essentially ceased to be a significant player in terms of energy footprint: its current consumption is tens of thousands of times lower than Bitcoin’s, despite having a large market cap and extensive use in decentralized applications.

This change not only almost completely eliminates the carbon emissions associated with Ethereum (by not requiring energy-hungry miners), but it also sets a precedent for the industry . Ethereum proved that it is possible to keep a large blockchain network secure without the need for excessive electricity consumption . Now, Ethereum validators (who replaced miners) only need to have their computers connected to the internet and consume what would be the equivalent of running a common server, which is insignificant compared to the previous global fleet of GPUs running at full power.

Ethereum’s transition to PoS is arguably the most important advancement in crypto sustainability to date. It means that all transactions, smart contracts, tokens, and projects living on Ethereum now operate with a minimal carbon footprint. For example, while a single NFT minted on Ethereum previously consumed perhaps days’ worth of electricity for a household, today that same transaction consumes the equivalent of a few seconds of that household’s electricity, or less. This has alleviated the concerns of many developers and users who wanted to take advantage of Ethereum but were held back by environmental concerns.

It’s worth noting that the Ethereum community didn’t stop there. Following the Merger, an initiative called the Ethereum Climate Platform was launched , made up of several companies and organizations in the Web3 space , with the goal of offsetting Ethereum’s historical emissions . coindesk.com Given that the network is now clean, this consortium seeks to fund green projects that absorb or reduce CO₂ equivalent to that emitted by Ethereum from 2015 to 2022 (its historical “carbon debt”). This gesture, rare in an industry criticized for its environmental footprint, highlights a commitment to amending past impact and ensuring Ethereum’s evolution aligned with climate goals.

Ethereum’s success with PoS also validates the viability of other alternative algorithms . Many newer cryptocurrencies (Cardano, Solana, Polkadot, Avalanche, Tezos, etc.) were already born using PoS or low-power variants, arguing that it is possible to achieve decentralization and security without wasting energy. Now, with Ethereum—the second-largest cryptocurrency—operating with PoS and maintaining (and even improving) its security, scalability, and performance, pressure is mounting on other currencies to consider sustainable alternatives. Ethereum has shown that sustainability is not incompatible with the success of a blockchain network ; on the contrary, it can be integral to its technological evolution.

Potential of cryptocurrencies in a sustainable future

Beyond minimizing their negative impacts, some advocates point out that cryptocurrency and blockchain technologies could even contribute positively to global sustainability in certain aspects. For example, blockchain applications are being explored to improve traceability in supply chains, including those of agricultural products or carbon credits, which could help combat climate change by ensuring integrity and transparency in emissions reduction projects. Carbon credit tokenization initiatives (such as those of organizations issuing tokens backed by captured CO₂) seek to leverage decentralized markets to fund more green projects. Likewise, decentralized climate finance platforms are emerging, where investors from around the world can support renewable energy initiatives through smart contracts.

While these uses are still in development, they illustrate that cryptocurrency isn’t necessarily synonymous with negative impact ; it all depends on how the technology is designed and used. In a future scenario, it’s possible to imagine blockchain networks powered largely by renewable surpluses, serving as flexible stores of value and transaction processing that even help balance electrical grids. For example, some schemes propose that miners could be switched on and off based on the availability of renewable energy, acting almost like “virtual batteries” that absorb energy when there’s excess (by mining intensively) and shut down when overall electricity demand is high. This could facilitate the integration of variable sources like solar and wind into the electrical grid, turning mining into an adjustable load that benefits the electrical system rather than straining it.

In short, the arguments for crypto sustainability paint a picture of a scenario where the industry learns and adapts: migrating to renewable sources , improving technological efficiency , adopting alternative consensus systems like PoS, and seeking out opportunities where crypto mining and decentralized technologies are positively integrated into the global energy transition. Ethereum has already demonstrated enormous progress; Bitcoin is showing gradual but significant progress. From this perspective, cryptocurrencies could be heading towards a point where their environmental impact is reduced and manageable , allowing the benefits of financial and technological innovation to not come at a prohibitive climate cost.

Of course, this is only one side of the coin. It’s essential to also analyze the counterarguments and evidence suggesting that, at least today, many cryptocurrencies are unsustainable and present serious challenges to be resolved. We’ll explore these points below.

Arguments against the sustainability of cryptocurrencies

Despite the aforementioned positive progress and trends, there are strong arguments against cryptocurrencies being sustainable at this time . Many experts, academics, and activists point out that the environmental impact of networks like Bitcoin remains extremely high and possibly incompatible with climate change mitigation goals. Furthermore, they criticize that the solutions proposed so far may be insufficient or slow to adopt, while the ecological footprint continues to grow. In this section, we will review the main concerns: from high energy consumption and carbon emissions , through electronic waste and other environmental damage, to scalability issues and the resistance to change of certain crypto communities. We will again use Bitcoin and Ethereum (in its PoW phase) as central examples, given that they have been the largest contributors to the problem.

Bitcoin’s high energy consumption and carbon footprint

Bitcoin’s energy consumption is the starting point for almost all environmental criticism. This network, by design, requires thousands of miners around the world to constantly waste electrical energy solving useless (from a production standpoint) mathematical problems in order to maintain the security of the chain. Although it is difficult to measure accurately in real time, various estimates agree that the annual electricity consumption of the Bitcoin network is enormous and has been increasing over time. To put this into perspective: as of August 2023, the Cambridge Centre for Alternative Finance estimated that Bitcoin consumed around 70–95 TWh (terawatt-hours) per year criptonoticias.com . This figure, 95 TWh, was the revised estimate for all of 2022 (slightly lower than previous calculations) criptonoticias.com . 95 TWh per year represents around 0.38% of global electricity consumption criptonoticias.com , which may seem low in percentage terms, but it is equivalent to all the electricity used by a medium-sized country in a year. In fact, 95 TWh is comparable to the national consumption of Belgium or the Philippines in a year criptonoticias.com . Another reference: in 2023, with the rise in the price of Bitcoin and more mining equipment, its consumption skyrocketed above 100 TWh; one analysis reported that in that year Bitcoin mining used some 121,360 GWh (121.36 TWh) , surpassing the consumption of countries such as Norway, Argentina or the Netherlands es.cointelegraph.com criptonoticias.com . Such colossal energy use by a single payment network is seen as inherently unsustainable by many critics. In a context where the world is struggling to save energy and replace fossil fuels, dedicating the equivalent of the electricity demand of millions of people to maintaining a cryptocurrency is highly controversial.

In addition to raw consumption volume, the associated carbon footprint matters . If the majority of that electricity comes from burning coal, natural gas, or other fossil fuels (as has historically been the case in several mining regions), then Bitcoin has a direct impact on greenhouse gas emissions . Estimates here vary: according to the aforementioned UN-backed study, in 2021, fossil fuels accounted for 67% of the electricity consumed by Bitcoin mining . This implies that more than two-thirds of the 173 TWh consumed in the analyzed period came from coal and gas plants, with the consequent CO₂ emissions. Using average emission factors, various studies have calculated that Bitcoin mining emits on the order of 50 to 100 million tons of CO₂ per year (50–100 MtCO₂). A 2022 Scientific Reports paper noted that at times Bitcoin activity produced over 60 MtCO₂ annually , a climate impact comparable to that of entire mid-sized economies, and estimated that every dollar of value created by Bitcoin was accompanied by $0.35 in global climate damages from those emissions (Jones et al., 2022). Another projection for 2024 suggests that annual emissions associated with Bitcoin could be around 74 MtCO₂ (million tons of carbon dioxide) ongoing.ibero.mx ongoing.ibero.mx . To put this in perspective: 74 MtCO₂ is similar to the annual emissions of countries like Greece or Austria. If Bitcoin were a country, it would be among the top 100 emitters in the world. Clearly, this level of carbon footprint clashes with the urgent emissions reductions we need to achieve across all sectors to keep global warming within manageable limits.

An underlying problem is that, by design, Bitcoin’s energy consumption tends to increase as long as there are economic incentives to do so . The protocol automatically adjusts mining difficulty so that, on average, a block is mined every 10 minutes regardless of how many miners there are. This means that if the price of Bitcoin rises (and therefore the mining reward in dollars increases), more miners will have an incentive to join or turn on more machines, increasing consumption until the costs balance the benefits. This pattern has already been observed: when the price of Bitcoin quadrupled from 2020 to 2021, the estimated energy consumption of the network increased by around 140% according to the UN report es.cointelegraph.com . In other words, Bitcoin’s financial success attracts more energy expenditure . This phenomenon, known as the rebound effect or Jevons paradox in energy economics, implies that efficiency improvements (more efficient miners) do not guarantee an absolute reduction in consumption – they often end up allowing the network to grow further (more hashrate), maintaining or even increasing total spending. As long as Bitcoin has a high market capitalization and its model remains PoW, there will always be an incentive to invest more electricity to obtain rewards, until the margin is no longer profitable. This dynamic fuels concerns that if Bitcoin continues to gain adoption or its price rises significantly further, its consumption could escalate to globally unsustainable levels (e.g., exceeding 1% of global consumption, etc.), unless the electricity matrix becomes completely clean before reaching that point.

In short, critics emphasize that Bitcoin currently consumes too much energy and generates significant emissions , which in the 21st century is difficult to justify for a single financial application. While there are efforts to use renewables, the reality is that a large portion of mining still relies on the conventional fossil-powered electricity grid, or even coal-fired plants reactivated due to their profitability (as seen in certain regions of the US). This level of consumption and emissions, they argue, is not environmentally sustainable in the context of the climate crisis. Every terawatt-hour of energy counts, and those 100+ TWh could power hospitals, schools, essential industries, or simply be diverted to reduce emissions, instead being used to mine digital currencies.

Ethereum’s historical environmental impact (before the transition)

While Ethereum has changed its fortunes as of 2022, it’s important to note that for several years it also contributed heavily to the sustainability problem . Ethereum, like Bitcoin, used proof-of-work, with the difference that its miners primarily used high-performance graphics cards (GPUs) . This led to, among other things, a shortage of GPUs on the market (impacting gamers and other users) and considerable energy consumption . By 2021, Ethereum consumed around 1/3 of Bitcoin’s . While Bitcoin was at ~130 TWh per year at the time, Ethereum was perhaps around 40–50 TWh at its peak (albeit with more variability). We already mentioned that coindesk.com consumed ~58 TWh in total from 2015 to 2022 , which implies a significant cumulative carbon footprint, given that many Ethereum miners were also located in regions with cheap fossil fuel electricity (for example, before 2021, much of Ethereum mining happened in China, just like Bitcoin, taking advantage of both seasonal hydroelectric surpluses and cheap coal).

Ethereum’s pre-2022 emissions also reached tens of millions of tons of CO₂. If we assume that its energy carbon intensity was similar to that of Bitcoin, an annual consumption of ~30–40 TWh could translate into ~15–20 MtCO₂ emitted per year by the Ethereum network at its peak. These emissions did not go unnoticed: there was an uproar in the digital art community when NFTs (many based on Ethereum) became popular after it was revealed how much CO₂ could be associated with each work. For example, internal memos from companies and universities discussed the ethics of launching projects on a platform that, cumulatively, had a footprint comparable to the precious metals industry or small countries .

Today, after the implementation of The Merge , Ethereum has practically eliminated these current negative impacts , but its years of PoW mining stand as a lesson in the environmental havoc that PoW blockchains can cause in a short period of time . The good news is that Ethereum was able to change course; the bad news is that for ~7 years it did contribute to the climate problem , and that is a period of time lost in terms of avoidable emissions. Some critics point out that the transition to PoS should have happened earlier (it was planned from the beginning of Ethereum, but it took a lot of technical effort and community coordination). Other smaller PoW projects, such as Ethereum Classic (an Ethereum fork that continued mining after the Merge) or cryptos like Dogecoin and Litecoin , still operate with PoW and add consumption (although they are smaller, Dogecoin, for example, uses the Scrypt algorithm in conjunction with Litecoin, and between them they perhaps add another couple of TWh per year).

The case of Ethereum before 2022 is often used to illustrate that it ‘s not just Bitcoin that’s the problem : any blockchain that uses proof-of-work at scale will have a huge environmental impact. If all major cryptocurrencies remained on PoW, they would multiply global consumption. Ethereum did the responsible thing by migrating, but Bitcoin and other networks are still hanging in the balance . Critics argue that unless Ethereum follows suit, the crypto sector as a whole will continue to have a dark shadow over it in terms of ecology. Even with Ethereum out of the consumption equation, Bitcoin alone remains a massive sustainability challenge (it now accounts for the vast majority of the industry’s energy consumption).

Ultimately, Ethereum served to highlight both the problem (until 2022) and the possible solution (after 2022). However, as long as the largest cryptocurrency (BTC) and others remain in PoW, concerns about the overall environmental impact of cryptocurrencies will not go away . It’s worth mentioning that not all projects will have the ability or willingness to do what Ethereum did – the Bitcoin community, for example, is strongly opposed to changing its consensus mechanism, leaving it up to external regulations or the evolution of the energy sector to mitigate its impact.

Electronic waste and other environmental damage

Beyond energy consumption and emissions, mining-intensive cryptocurrencies also generate additional environmental externalities , notably the generation of electronic waste (e-waste) . The relatively short lifespan of mining equipment, coupled with the constant quest for efficiency, means that thousands of tons of hardware become obsolete every year. In the case of Bitcoin, old ASIC miners (no longer profitable due to their lower efficiency) are replaced with new models, and these old devices often end up discarded. A 2021 study estimated that the Bitcoin network as a whole could be generating around 30,000 tons of e-waste per year (de Vries & Stoll, 2021). This includes ASIC chips, boards, power supplies, fans, etc. – comparable, according to the authors, to the amount of e-waste from personal devices that a country like the Netherlands produces in a year. The problem with this waste is twofold: first, the material footprint of extracting the metals and manufacturing the chips (which, although smaller than the energy footprint, is not negligible); and second, the final disposal of the equipment. Many of these devices lack adequate recycling programs, especially when disposed of in developing countries. They contain toxic components (plastics, heavy metals in solder, etc.) that can contaminate soil and water if not managed properly. Furthermore, the informal burning of e-waste to recover copper or other metals generates local polluting emissions that affect health.

While, as we mentioned, there are signs that mining equipment is lasting longer than before, constant innovation ensures that there will always be waste generated at some rate . If a mining rig lasts 4 years instead of 2, that halves the annual waste rate, but it will still eventually have to be disposed of. And given that the Bitcoin network in 2023 was likely supported by somewhere in the range of 3-5 million ASICs worldwide, generational turnover even every 4-5 years still means hundreds of thousands of devices are thrown away annually. Ethereum, by using GPUs, generated a different kind of e-waste: after its switch to PoS, many graphics cards were left unused for mining . While GPUs are reusable for other purposes (e.g., gaming, computing), in practice many had been overused and could end up scrapped or sold cheaply, flooding secondhand markets.

Another environmental harm associated with intensive mining is the local impact on communities and ecosystems near mining operations . For example, noise pollution problems have been reported : mining farms, with hundreds or thousands of machines cooled by industrial fans, produce a constant, high-intensity noise that neighbors can compare to that of an airport or factory 24/7. Rural communities in Texas, New York, and other regions have filed complaints and even lawsuits over noise and vibration levels from nearby mining facilities, arguing that they impact their quality of life. There is also the issue of wasted heat : giant mining plants emit enormous amounts of heat into the environment, which can raise local temperatures in enclosed spaces or require evaporative cooling (consuming water, a critical resource in some locations). In areas where electricity comes from coal-fired power plants, increased demand from mining can lead to more coal extraction , with the ensuing environmental and social impacts (from deforestation to air pollution with particulate matter and acid rain).

No less important is the impact on the global supply chain for electronic chips . The mining frenzy has contributed to semiconductor shortages at times. For example, the massive demand for GPUs for mining Ethereum between 2017 and 2021 affected the availability of those cards for other sectors, and indirectly increased production (and therefore, the use of materials and energy) in chip factories, with the corresponding manufacturing footprint. The same is true for Bitcoin ASICs: companies like Bitmain and MicroBT order large volumes of silicon wafers from TSMC or Samsung to manufacture their mining chips, competing for manufacturing capacity that could be used for other purposes (although this is part of a complex market, its influence is not trivial when Bitcoin is on the rise).

In short, critics argue that sustainability goes beyond carbon emissions —and includes these other areas where, unfortunately, PoW cryptocurrencies have had a poor track record. The accumulation of discarded hardware, local noise or heat pollution, stress on the chip production chain, and the indirect use of other resources (water for cooling, land for coal or gas extraction, etc.) paint a picture where the ecological and social impact of cryptocurrencies is not aligned with circular economy principles or environmental respect. From this perspective, cryptocurrency mining could be considered unsustainable not only because of its energy consumption, but also because of its waste of equipment and resources .

Scalability limitations and inefficient energy use

Another important argument against it points to the inherent inefficiency of the Bitcoin model (and PoW in general) when comparing the utility provided with the energy consumed . For example, the Bitcoin network processes around 5-10 transactions per second on average , an extremely small number compared to traditional payment systems (Visa, for example, handles thousands per second). For comparison, Bitcoin handles less than 100 million transactions per year , yet consumes ~100 TWh to do so. That comes out to an average of around 1,000 kWh per transaction (although not exactly linear, it is indicative). To illustrate: 1,000 kWh is the energy consumed by an average household in Latin America over several months . In fact, one frequently cited report stated that “each Bitcoin transaction requires 1,173 kWh of electricity, equivalent to the electrical consumption of an average household for six weeks” cryptorobotics.ai . Although network consumption doesn’t technically increase with each transaction (because the cost is more or less constant regardless of the number of transactions included in the blocks), this metric serves to show the disproportion between utility (moving value between two people) and the associated energy cost . No other financial or payment system in history has had such an astronomical energy cost per transaction .

Even if we use the more charitable metric of “energy per security” instead of energy per transaction, one can question how much marginal security all that consumption provides. That is, Bitcoin consumes ~100 TWh to keep its chain immutable and secure against attacks, but could a sufficient level of security be achieved with much lower consumption? Networks like Ethereum have proven that this is possible, using PoS. Critics therefore call Bitcoin’s PoW “energy waste by design ,” since most of the computations performed have no other purpose than to prevent double-spending, something that could be done with alternative algorithms. This waste contrasts with the notion of sustainability, which involves using resources optimally and with the least possible waste.

Furthermore, Bitcoin’s intrinsic lack of scalability (excluding secondary layers) suggests that if it were to scale to millions of active users, its consumption would have to grow proportionally , or each transaction would be a battle for block space with very high fees. Neither option is desirable: growing consumption linearly with demand would make Bitcoin completely unviable in ecological terms; and keeping throughput low means each individual transaction continues to bear the burden of all the fixed energy costs. In both cases, inefficiency is perceived .

Critics also argue that purported solutions like the Lightning Network, while increasing the number of possible transactions, don’t reduce absolute consumption ; that is, Lightning may improve per-transaction efficiency, but it still requires the underlying network to spend heavily to maintain security. And Lightning faces its own challenges with adoption, liquidity, and so on, so it’s not an immediate panacea.

In contrast, proof-of-stake and other mechanisms allow the energy required to scale sublinearly with the number of transactions or users. For example, Ethereum in PoS can increase its number of transactions (with protocol improvements) without a noticeable increase in consumption, since the greater burden falls on logical computations, not on burning more electricity. Bitcoin in PoW lacks this elasticity; it is rigid in terms of block consumption and block capacity.

All of this leads to the accusation that Bitcoin is one of the most energy-inefficient payment systems ever created , and therefore doesn’t qualify as sustainable. Even compared to historically intensive industries, there are studies that equate Bitcoin’s inefficiency to that of “mining digital gold” with electric picks and shovels : it expends similar energy as actual gold mining, but only to move bits around on a ledger (Huang et al., 2021). Some detractors go so far as to propose that, instead of Bitcoin, using the same energy to mine gold and back a token would be more efficient in terms of value produced per kilowatt (a somewhat ironic comparison).

In short, the criticism here is that we are not getting enough social/economic return on our energy input . An ideal financial system should process millions of transactions in fractions of a kWh, not require entire power plants for a few transactions. This inefficiency is seen as unsustainable because in a world with limited energy resources and a climate crisis, technologies with low throughput and high consumption are candidates for elimination or replacement with more efficient ones. If Bitcoin does not substantially improve this ratio (which is unlikely with pure PoW), many argue that it simply has no place in a sustainable future , at least not in its current form.

Persistence of unsustainable cryptocurrencies and resistance to change

Finally, one argument against the future sustainability of cryptocurrencies is the resistance to change from communities and the persistence of unsustainable projects. Bitcoin is the emblematic case: despite criticism and campaigns (such as Greenpeace’s “Change the Code, Not the Climate” campaign launched in 2022 calling for Bitcoin to migrate to PoS), it is highly unlikely that Bitcoin will change its consensus mechanism . The mainstream Bitcoin community values the security and simplicity of PoW, and deeply distrusts PoS, considering it more centralized or less proven. Even Cambridge academics have pointed out that PoS and PoW have trade-offs : PoW is harder to attack without massive physical infrastructure, while PoS relies more on economic staking coindesk.com . These ideological/technical stances mean that while Ethereum has demonstrated a path, Bitcoin will not follow . Thus, we will have the world’s largest cryptocurrency operating on PoW “forever” (or for the foreseeable future). This poses a huge challenge: how can Bitcoin’s long-term presence be sustainable if it isn’t going to voluntarily reduce its consumption? Critics respond that it can’t be done , that Bitcoin will be a constant energy drain with climate impacts unless external measures (strict regulations) are taken or some unlikely change in its governance occurs.

Likewise, there are still multiple smaller cryptocurrencies that use highly inefficient consensus algorithms . For example, Monero , Zcash , and other PoW altcoins contribute to the total consumption (albeit significantly less than Bitcoin). Even Dogecoin , which rose to popularity in 2021, operates under PoW (merged with Litecoin) and its own co-founder, along with Vitalik Buterin, suggested migrating it to PoS – something that has not materialized. If these coins continue using PoW simply due to inertia or lack of coordination to change , they will continue to add to the global footprint. And if any of them grow significantly in capitalization/use, they would replicate the problems of Bitcoin/Ethereum PoW.

This point argues that, despite known solutions, there is inertia and reluctance to change that could prolong unsustainability. Changing a consensus algorithm in a large decentralized network is very complex: it requires social buy-in, technical development, and coordination—it took Ethereum almost seven years to achieve this. Bitcoin will probably never even attempt it. Therefore, it’s not enough for the technology to exist; the will to adopt it is important . And currently, the will in certain sectors is lacking.

On the regulatory side, there has also been slowness until recently. Authorities only began to seriously discuss the issue in 2021-2022 (as we’ll see in the solutions section), but until strong global regulations are in place, Bitcoin and others can continue with “business as usual.” Critics fear that solutions will come too late or be partial, and that in the meantime, emissions and problems will continue to accumulate.

In conclusion, the counterarguments paint an alarming picture: an emerging financial system that, in its current form, demands disproportionate energy consumption and generates considerable environmental impacts, with no clear mechanism to self-regulate that footprint . While acknowledging progress (e.g., Ethereum moving to PoS), they emphasize that the core of the problem persists with Bitcoin and others , and that without radical interventions or changes, cryptocurrencies could become increasingly unsustainable as their adoption grows. This critical perspective prompts us to examine what can be done about it. In the next section, we will address the proposals and solutions put forward to reconcile cryptocurrencies with environmental sustainability.

Proposals and solutions to improve sustainability

Given the diagnosis of the problems, what is being proposed or done to improve the sustainability of cryptocurrencies ? Fortunately, this issue has come to the forefront in recent years, with various mitigation strategies suggested by the crypto industry, regulators, engineers, and academics . Below, we organize the solutions into several categories: (1) changes to consensus mechanisms, especially the transition to Proof of Stake (PoS) or other alternative algorithms; (2) promoting the use of renewable and clean energy sources in mining; (3) technical and scalability optimizations to make networks more efficient; and (4) public policies and regulations that incentivize or enforce more sustainable practices in the crypto ecosystem. These measures are not mutually exclusive—in fact, an effective response is likely to involve a combination of all of them. Let’s look at each one in more detail.

Transition to Proof of Stake and alternative algorithms

The most direct technological solution to root out excess energy consumption is to change the consensus mechanism of blockchain networks. Instead of proof of work , where energy expenditure is intrinsically linked to security, algorithms can be used that eliminate the need for constant, costly calculations . The most important of these is proof of stake (PoS) , which we explained in previous contexts. In PoS, security is guaranteed through deposits of value (stakes) that validators must stake; if they act dishonestly, they can lose those coins. This replaces “spending energy” with “risking capital” as a mechanism to discourage attacks. The result is minimal energy consumption : validator nodes perform trivial computational work (similar to running a normal network node) compared to PoW miners. According to some estimates, a PoS network can consume less than 0.1% of the energy that the same network would require operating under PoW (it depends on the number of validators, but in general it is a difference of several orders of magnitude).

Ethereum has already demonstrated the success of this transition in 2022, which has given impetus to the idea that others could follow. Many of the new blockchains already choose PoS by default to avoid the label of polluters. Projects such as Cardano (ADA) , Polkadot (DOT) , Solana (SOL) , Avalanche (AVAX) , Algorand (ALGO) , Tezos (XTZ) , among others, have been using PoS variants since launch. This means that, except for a small fraction of consumption on servers, their operation does not involve a large environmental impact . Some of these networks even advertise being carbon neutral , purchasing carbon credits to offset their already low residual emissions. Proof of stake is quickly becoming the industry standard outside of Bitcoin.

For existing networks that still use PoW, the transition is more complicated. Bitcoin, in particular, faces a lot of internal resistance to switching to PoS , for both philosophical and technical reasons. Bitcoin developers and miners argue that PoW is essential for decentralization and security; they are confident that with sufficient migration to renewable energy and efficiency improvements, Bitcoin will be able to coexist with environmental goals without changing its core code. However, environmental activists and some crypto industry figures (such as Greenpeace or Ripple co-founder Chris Larsen) have advocated for Bitcoin to at least consider modifying its PoW to a less intensive one or eventually switching to PoS. The “Change the Code, Not the Climate” campaign , launched in March 2022, sought to pressure the Bitcoin community in this direction, although it has so far failed to gain traction within the Bitcoin ecosystem .

While Bitcoin probably won’t change, other smaller PoW networks could . For example, Dogecoin —the famous memecoin championed by Elon Musk—has expressed interest in PoS (Musk supported the idea of Dogecoin “modernizing” its code). Ethereum Classic and Monero could also theoretically migrate, although their communities don’t have it on their agendas for now. Market developments could play a role here: if over time the only highly valued cryptocurrencies are those with green credentials, PoW projects could be relegated or pressured to change in order to remain relevant.

In addition to PoS, there are other innovative alternative algorithms under development or in experimental use that could improve sustainability:

• Proof of Authority (PoA) : Used on some private or consortium chains (e.g., some Ethereum sidechains, initially the Binance Smart Chain validator network). In PoA, a fixed set of trusted validators produces blocks. Its energy usage is low, although it sacrifices decentralization; it is more commonly used in enterprise or permissioned contexts.
• Proof of Space / Proof of Storage : For example, the cryptocurrency Chia (XCH) uses Proof of Space and Time , where the scarce resource is disk space. Miners fill hard drives with data, and proofs check whether they have committed any space. Chia consumes much less energy than PoW (hard drives consume little power at rest), although there has been criticism that it put a lot of wear on SSDs due to the initial plotting phase (creating files), which also leads to e-waste. Nevertheless, it is an interesting attempt at resource diversification: using storage instead of electricity as the basis for consensus.
• Proof of Stake Variants : There are many PoS variants that aim to optimize security and decentralization (DPoS – Delegated Proof of Stake , BFT PoS, etc.). For example, Polkadot uses Nominated PoS with hundreds of validators; Solana adds a “Proof of History” mechanism to efficiently order events in time; Avalanche uses a highly communication-efficient dag consensus protocol. All of these variants share the attribute of low energy consumption.
• Proof of Burn : A mechanism in which value “sacrifices” (e.g., burning coins) are demonstrated instead of expending energy. It is not popular or widely tested, but conceptually avoids direct energy expenditure.
• Proof of Useful Work : An area of research that attempts to make PoW computational work useful (e.g., scientific calculations, machine learning, searching for extraterrestrial signals, etc.). The idea is that, instead of computing random hashes, miners compute tasks that have intrinsic value, obtaining an answer whose difficulty can be adjusted similarly to traditional PoW. This sounds ideal (gaining blockchain security while solving real-world problems), but it is very difficult to implement without compromising security or fairness. Some projects (such as FoldingCoin, Gridcoin ) have explored rewarding contributions to distributed computing (BOINC, [email protected]) with tokens, but so far none have replaced PoW on a large network. Still, it is a field of study that could bear fruit in the future, turning PoW “work” into something usable.

In conclusion, migrating to alternative consensus algorithms appears to be the most obvious solution to eliminating most of the unnecessary energy consumption in cryptocurrencies. Ethereum has opened the door, proving that it is feasible. The challenge is mostly social and political in the case of Bitcoin; in other cases, it is technical but possibly achievable. If we were able to get the major cryptocurrencies to adopt mechanisms like PoS, the sustainability discussion would change radically: we would no longer be talking about terawatt-hours, but perhaps gigawatt-hours in total, which is manageable. Although it seems difficult to change Bitcoin today, circumstances (e.g., regulations or pressure from institutional investors with ESG mandates) could eventually force a reevaluation. In the meantime, the focus is on other complementary solutions.

Use of renewable energy in mining

Another crucial avenue is to green the energy supply of existing mining operations. If Bitcoin (and other remaining PoW) mining is going to continue to require significant electricity, the most important thing is to ensure that this electricity is as clean as possible. Several strategies are included here:

Incentives to mine with renewables: Since the cost of electricity is the primary factor in mining profitability, and renewable sources (solar, wind) have become significantly cheaper over the past decade, it makes economic sense to use renewable energy when available. Many Bitcoin mines are already installed near cheap hydroelectric power sources (e.g., in Paraguay taking advantage of the Itaipu Dam, in Canada with hydroelectric plants in Quebec, in Sichuan, China during monsoon season, etc.). As the cost of solar and wind energy drops, miners could sign direct agreements with solar/wind farms or even build their own dedicated plants. For example, in Texas, several mining companies have co-invested in solar farms that power both the general grid and their equipment. In El Salvador, “ Volcanic Bitcoin ” is being promoted, using geothermal energy to power miners with 100% renewable energy. In Iceland and Norway, virtually all crypto mining uses renewable energy (geothermal and hydroelectric, respectively), and those operations are considered role models.

Using Surplus and Wasted Energy: As mentioned previously, mining can take advantage of peak renewable energy production that would otherwise be wasted. One problem with intermittent renewable energy is that it sometimes generates more than the local grid can absorb (think: a very sunny day with low demand, or a windy night in a sparsely populated area). Typically, this surplus is wasted (turbines are taken offline, production is curtailed). Miners can set up shop at these sites and consume the surplus as it occurs , monetizing the energy that would otherwise be lost. This improves the profitability of renewable projects, with mining acting as a buyer of last resort . In locations with isolated or remote grids, mining can help justify installing oversized renewable capacity (knowing that there will be a productive use for the surplus). For example: in certain regions of China, during the rainy season, hydropower production exceeded local demand, so Bitcoin miners would temporarily set up shop there to use the surplus. Although China later banned mining, the concept continues to apply elsewhere.

Grid hybridization and stability support: In places like Texas, grid-tied miners have acted as flexible loads. When overall demand is low and generation is abundant (e.g., on a windy night), they consume cheap power; but when there is a heat or cold wave and the power system is under stress, some miners agree to shut down their equipment to free up capacity for other users . This has happened during cold snaps in Texas: mining companies have drastically reduced their consumption, returning tens of megawatts to the grid for use in residential heating, potentially avoiding blackouts . Although miners do this because they receive compensation for interruptible demand, from a system stability perspective, having large loads that can be quickly switched on and off is valuable. It is argued that, well regulated, mining could be integrated into power systems as an element of demand response , usefully mitigating peaks and valleys.

Green regulations and certifications: Governments can set environmental standards for mining. For example, they could require operations above a certain scale to use a minimum percentage of renewable energy or purchase clean energy credits equivalent to their consumption (similar to mandatory renewable portfolios for companies). There is also discussion of imposing a carbon or emissions tax on the electricity consumed by miners, which would make fossil fuel use more expensive and favor renewable energy. Another option is renewable energy certificates : mining companies could voluntarily or compulsorily purchase RECs (Renewable Energy Certificates) to match their energy consumption with renewable generation on their balance sheet, achieving carbon neutrality. Some firms already do this to improve their ESG image.

Concrete policy examples: In the European Union, during the debate on the Markets in Crypto-Assets (MiCA) regulation, a ban on energy-intensive crypto mining was discussed. Ultimately, it wasn’t banned, but the EU included provisions requiring crypto-asset providers to disclose information on the environmental footprint of their services. Furthermore, the EU urged member states to discourage mining projects that rely on dirty energy and to consider shutting down mining in the event of power rationing. Some European countries (Sweden, Norway) have proposed specific taxes on crypto mining to reflect its impact. Conversely, countries with abundant renewable energy can do the opposite: offer cheap green energy to miners in exchange for investment. El Salvador is a case in point, as is Paraguay (the Senate even proposed laws to regulate mining by taking advantage of its massive hydroelectric surplus).

Methane capture and unconventional fuels: We already mentioned the use of petroleum flare gas for mining. This could be promoted more broadly: regulators could incentivize oil companies to channel their flare gas to miners instead of burning it unused. Projects have even been proposed where miners feed on biogas from landfills or farms (methane captured from organic waste), converting a greenhouse gas into (less harmful) CO₂ and cryptocurrency. Such projects make mining part of the solution to local environmental problems (methane emissions, landfill odors) while generating revenue.

In short, green mining is an essential solution in the short and medium term, as long as Bitcoin and other networks continue to use PoW. This doesn’t reduce consumption per se, but it dramatically reduces carbon emissions and the ecological footprint associated with that consumption . Ideally, we would want both (less consumption and clean consumption), but if the former is difficult to achieve for now, at least achieving the latter is essential. Mining powered by solar panels, wind turbines, hydroelectric dams, and geothermal volcanoes is much more sustainable than mining powered by coal or diesel. Of course, building renewables has its own impact, but it is vastly preferable to continuing to burn fossil fuels. And as power grids decarbonize globally, the mining connected to them will decarbonize as well. So this solution is actually aligned with the global energy transition already underway: it’s about ensuring that cryptocurrencies keep up, not lag behind by consuming coal in a world trying to phase it out.

Technical optimizations and scalability

In addition to changing the consensus mechanism or the energy source, there are a number of solutions focused on improving the technical efficiency and scalability of blockchain networks , so that each unit of energy consumed yields more utility. We already touched on some aspects of this when discussing the Lightning Network and hardware efficiency, but we’ll expand on it here in the form of concrete proposals:

Protocol improvements in Bitcoin: Although Bitcoin won’t change PoW, it can incorporate upgrades that allow existing capacity to be used more effectively. One example was SegWit (Segregated Witness) in 2017, which slightly increased the number of possible transactions per block through better block space management. Future proposals such as Taproot (implemented in 2021) and other signature optimizations allow for consolidating multiple transactions or making transactions more compact. This means that, with the same fixed energy consumption, more transactions can be confirmed in each block. If Bitcoin could, through software improvements, double its capacity without increasing consumption, this would mean that the energy per transaction would be cut in half (on average). There are practical limits, but work is being done on things like larger or more flexible blocks (controversial due to decentralization), transaction data compression protocols , and so on. Every small improvement adds up.

Secondary Layers (L2) and State Channels: The Lightning Network in Bitcoin and rollups in Ethereum are examples of how second-layer scalability improves efficiency. These technical solutions allow many interactions to occur “off-chain,” with only final results or summaries recorded on the main blockchain. For every byte written on the base chain (which is energetically expensive), it can be made to represent kilobytes of actual transactions made off-chain. Driving the adoption of Lightning for everyday Bitcoin payments is, therefore, a strategy to enable Bitcoin to support more volume without proportionally increasing its footprint. In post-Merge Ethereum (which no longer has a large footprint, but the point is worthwhile), accumulation rollups (Optimistic, ZK-rollups) allow hundreds of transactions to be processed for the computational cost of one, multiplying efficiency. State channel or plasma technologies (older proposals) also work in this direction to minimize on-chain writes.

Sharding and load balancing: Sharding is on the future roadmap for Ethereum , which means dividing the processing load between multiple subchains. While Ethereum no longer has a power consumption problem, sharding will allow a single node to not have to process all transactions, potentially reducing the requirements per node and increasing the total transaction count. In PoW networks, sharding is difficult, but there is the idea of Proof of Work sharding or multi-chain sharding, which has not been implemented in Bitcoin but could one day be considered in other currencies: having several smaller PoW “subchains” running in parallel instead of one megachain, so that miners can choose which ones to contribute to and not all of them waste energy securing the same unique block sequence. However, this is theoretical and complex to synchronize while maintaining common security.

More efficient hardware and optimized mining practices: Technical optimization also occurs at the physical level. As we’ve already discussed, new, more efficient ASIC models will reduce energy per hash. Continuing to support semiconductor innovation is important: for example, moving from 7nm to 5nm to 3nm chips in miners, using 3D packaging, etc., can extract more performance per watt. Some companies are exploring mining with superconducting cooling or in cryogenic fluids, even seeking to have chips operate at better parameters. The organization of mining data centers can also improve: designing farms with on-site renewable energy , with heat reuse , with efficient passive cooling systems , etc., all contribute to a lower net consumption or a more efficient operation per hash unit.

“Adaptive” Proof of Work or adjustable parameters: Modifications to PoW have been proposed to make it less constant. For example, the PoW network could adjust its difficulty not only to maintain 10 minutes per block, but also to limit the total energy expended. A crazy idea: if it were possible to detect that X% of miners are using renewable energy, adjust the difficulty accordingly. This is complex and easily manipulated, so it’s not implemented. Another idea: “rest” periods in mining if a certain condition is met; this breaks the continuous security of PoW, so it’s not very viable either. In general, PoW doesn’t lend itself to efficiency adjustments without losing its security guarantees, hence the need for solutions outside of it.

Academic and collaborative research: Optimization also comes from better understanding the problem. Universities and energy laboratories are studying mining consumption patterns, seeking ways to better integrate them into energy systems. Economic models are even being researched so that Bitcoin’s difficulty incorporates the social cost of carbon (although changing Bitcoin’s formula to “internalize externalities” sounds far-fetched, it is at least theoretically discussed). Collaboration between blockchain engineers and energy experts will be crucial for innovations that combine both worlds. For example, protocols that adjust mining frequency to match the frequency of the electrical grid and aid in regulation (that would be an interesting dual use).

In short, technical optimizations seek to achieve greater efficiency (more transactions, more utility) for a given consumption . This doesn’t eliminate the footprint, but it dilutes it over a larger volume of activity, making the system more sustainable per unit of profit . Combined with the use of renewables, such optimizations can lead to a system like Bitcoin, which today seems extremely inefficient, being able to serve many more people in the future with the same or a smaller relative footprint. It’s not about a single big solution, but rather many small incremental improvements that together make a difference.

Public policies and regulations

Finally, an essential component for driving sustainability in cryptocurrencies comes from the sphere of public policy and government regulations . Since cryptocurrencies operate globally and in a decentralized manner, regulation is complex, but governments have tools to influence the industry’s environmental behavior. Several actions are already being considered or discussed:

Restrictions or bans on polluting mining: The most notorious case was China , which in June 2021 banned Bitcoin and cryptocurrency mining within its territory. Until then, it was estimated that between 60-70% of global Bitcoin mining power operated in China, much of it fueled by coal (in regions such as Xinjiang and Inner Mongolia) and some by hydropower (Sichuan, Yunnan). The Chinese ban was motivated by several reasons (financial control, eliminating competition for its digital currency, etc.), but environmental concerns were one of them , as China had carbon targets to meet and local mining was hindering them. Within months, Bitcoin’s hash rate migrated to other latitudes. While this did not reduce global consumption for long (mining was reestablished in Kazakhstan, the US, Russia, etc.), it did show that a government can abruptly shut down mining activity within its borders because it considers it unsustainable. Some critics see the Chinese ban as an example to follow – they suggest that other countries should ban PoW mining, thus forcing the ecosystem to transition to clean models or to be confined only to places with renewable energy surpluses.

Along those lines, an amendment to ban the offering of PoW-based cryptoassets was even considered in Europe . Ultimately, this failed to make it into the MiCA regulation, but reflected political pressure. Kazakhstan (which, following China’s exit, became the second largest mining power company) imposed restrictions and higher electricity rates on miners when it faced a local energy crisis and is planning a value-added tax. Iran has temporarily banned mining during the summer to avoid blackouts, as many miners had set up shop using subsidized electricity. Inner Mongolia (an autonomous region in China) had already declared mining illegal before the total ban was imposed due to its high consumption. Even in the US, New York approved a two-year moratorium on new mining operations using energy from fossil fuel plants in 2022, following concerns about a gas-fired plant reactivated to mine Bitcoin. All of this indicates a trend: wherever mining threatens electrical stability or environmental goals, regulators are willing to curb it .

Transparency and Mandatory Reporting: Another strategy, less drastic than prohibition, is to require transparency. For example, in the EU, with MiCA, it was agreed that cryptocurrency service providers must report their carbon footprint and energy consumption . This does not prohibit anything directly, but it generates public data and can pressure companies to reduce their impact so as not to lose face in the eyes of environmentally conscious investors and customers. In the US, in September 2022, the White House (Office of Science and Technology Policy, OSTP) issued a report on crypto mining and climate that recommended developing environmental disclosure standards for crypto companies and studying measures to mitigate impacts, including the possibility of limiting or banning high-power consensus technologies if proven necessary to meet climate commitments (OSTP, 2022). Although it was only a recommendation, it indicates the direction that policy could take: measure first, then possibly regulate.

Tax incentives and green subsidies: Instead of punishing, they can also be positively incentivized . Governments could offer, for example, tax breaks or subsidies to mining operations that use 100% renewable energy or that set up in regions with surpluses. A case in point: The government of El Salvador offers tax and energy benefits for geothermal “volcanic mining.” In Paraguay, there was debate about giving preferential rates to miners to tap into unused energy from Itaipu (albeit with a consumption cap). In the US, some states compete to attract miners by offering them cheap electricity (usually from clean or nuclear sources) and relaxing taxes. This is certainly controversial—subsidizing crypto mining isn’t popular everywhere—but in certain jurisdictions with a lot of surplus renewable energy, it can be seen as a win-win: constant consumption for their energy industry and a green label for miners.

E-waste regulations: Another area of regulation involves mandating waste management plans for mining companies. They could, for example, require operators to recover a certain percentage of their retired equipment and recycle it appropriately. Or they could prohibit the import of old, inefficient equipment (to prevent it from being sent to developing countries for dirty consumption and then dumped there). They could also promote the circular economy: making it easier for retired ASICs to be sold on a smaller scale in places where they are still useful (e.g., to small-scale miners using home-grown renewable energy, etc., instead of directly scrapping them).

International Collaboration: Since Bitcoin is global, regulatory actions should ideally also be coordinated. Perhaps in the future we’ll see something like an international agreement on sustainable crypto mining , where countries agree on minimum standards. For now, this doesn’t formally exist, but forums like the G20 have begun to include the impact of digital assets in discussions. Even the IPCC (Intergovernmental Panel on Climate Change) mentioned cryptocurrencies in a report as an emerging consumption issue to monitor. If pressure continues, it’s plausible that they will be discussed at climate summits. Some have already proposed including cryptocurrency mining in countries’ emissions inventories (e.g., a Bitcoin-exporting country should account for the emissions from its electricity consumed by miners).

Industry Self-Regulation: In addition to public regulations, the crypto industry itself is organizing. The Crypto Climate Accord is a voluntary initiative, inspired by the Paris Agreement, where crypto companies commit to achieving net-zero emissions in their operations by 2030. Dozens of mining companies, exchanges, investors, and others have signed this voluntary agreement, committing to transparency and migrating to renewable energy. While it is non-binding, it creates a framework for collaboration and common goals. Likewise, the Bitcoin Mining Council publishes quarterly data on its energy mix to show progress (albeit self-reported). Such self-regulatory efforts seek to demonstrate that the industry can correct course without the need for bans . Time will tell whether they are sufficient or not, but they are part of the solution.

In short, public policies can set limits where the market alone cannot. The threat of strict regulations has already put sustainability on the crypto community’s agenda. A balance of “carrots and sticks” —restrictions on dirty mining, incentives for clean mining—is likely the most effective way to steer the industry toward sustainable practices. International coordination and pressure from ESG-based investors can also accelerate these changes.

Conclusions

The relationship between cryptocurrencies and sustainability is complex and has evolved rapidly in recent years. Bitcoin and Ethereum , as emblematic cases, show us two divergent paths: one, that of Bitcoin, where the original architecture (intensive PoW) presents major environmental challenges; the other, that of Ethereum, where the desire for change and innovation have made it possible to reduce its ecological footprint almost to zero. In the arguments for , we saw that there are reasons for optimism: the trend towards renewable energy in mining, continuous improvements in hardware efficiency, the proliferation of consensus mechanisms such as Proof of Stake , and an ecosystem increasingly aware and active in searching for solutions. In the arguments against , we noted that serious problems persist: Bitcoin’s energy consumption remains immense compared to its utility, the associated CO₂ emissions contribute to global warming, and the generation of waste and other local impacts are not negligible. Furthermore, structural factors (such as the PoW economy and the resistance to change of some communities) make it difficult to fully resolve these issues in the short term.

However, a review of current proposals and advances , it’s clear that the sustainability of cryptocurrencies is not a static issue , but a moving target with significant recent progress . Ethereum’s transition to PoS in 2022 marked a turning point, demonstrating that it is possible to reconcile a large-scale blockchain network with a low environmental impact. At the same time, the Bitcoin mining industry is showing signs of “cleaning up” by increasing the use of renewable energy, driven both by economics (cheap green energy) and public pressure. Developments in the Lightning Network, Layer 2, and other optimizations are improving the efficiency of the ecosystem. And from the regulatory perspective, red lines and goals are being drawn that require considering the environmental dimension in the growth of cryptocurrencies.

We can conclude that while cryptocurrencies face undeniable sustainability challenges today, they also have paths to overcome them . In the short term, it is crucial to mitigate the impact of Bitcoin—the source of most crypto energy consumption—through clean energy and smart regulation, given that its protocol itself will not change overnight. In the medium to long term, we could expect that new innovations (perhaps even in Bitcoin one day) and the continued adoption of efficient mechanisms will make the next generation of cryptocurrencies inherently sustainable . Indeed, it is plausible to imagine a future in 5 to 10 years where the debate has shifted: with major networks operating with near-carbon-neutral footprints and with energy mostly coming from renewable or surplus sources, the focus might no longer be on how much they consume, but on what value they bring to the financial and social system .

In the meantime, monitoring and scrutiny must continue. It’s healthy to continue researching and publishing the truth about the environmental impact of cryptocurrencies (with scientific rigor), and for the crypto community not to fall into complacency or greenwashing . Numbers must guide the narrative: if consumption and emissions indicators decrease year after year thanks to the measures implemented, we can speak of genuine sustainable progress. If not, it will be necessary to redouble efforts or rethink strategies.

In short, “Challenges and Advances” summarizes the current situation well. The sustainability challenges of cryptocurrencies are significant, but the progress made and those yet to come suggest they are not insurmountable. Just as blockchain technology has been disruptive and innovative in the financial world, it now has the opportunity to be so in the field of sustainability as well, transforming from a high-impact industry into a model for how to adapt and positively contribute to a world that increasingly demands environmental responsibility. The outcome will depend on decisions made today: by developers, mining companies, investors, and legislators. The good news is that the course can be directed—and is already being directed—toward greener solutions. There is still work to be done, but with awareness, innovation, and collaboration, the vision of sustainable cryptocurrencies can become a reality, harmonizing the digital financial revolution with the necessary preservation of the planet.

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