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CRYPTOCURRENCY CONCERNS
What is cryptocurrency? How does it a ect us? What does its future look like? Read up on the ongoing concerns surrounding this digital currency.
WORDS BY NASH LINSLEY | ART BY AMANDA O’BRIEN
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Currencies have been used in society since the reign of the Roman empire and have evolved into the complex system of nationally or regionally specifi c currencies we know today. Evolving yet again, currencies are being taken completely online with the emergence and popularization of cryptocurrencies over the last 12 years. Bitcoin, a digital currency system, gained traction in 2009, and in its wake, other forms of cryptocurrencies are becoming viable forms of payment all across the world with countries such as El Salvador and Cuba making bitcoins legal tender. This supports a promising future for the relatively young currency with its advantages in transparency and global interconnection.
However, despite cryptocurrencies being accepted around the world, environmental concerns are becoming increasingly present and obvious. From the mining of specifi c currencies to verifying transactions in a blockchain system, the energy consumption generated by cryptocurrencies is accelerating the worldwide climate crisis.
This new age digital mining is reminiscent of the California Gold Rush of the mid-1800s. This similarity is seen not only in the parallel between the gold rush and the seemingly instantaneous boom of cryptocurrencies in the last fi ve years but also in the environmental impacts both “rushes” have caused. No matter how archaic the gold rush may seem nowadays, the number of similarities it has to cryptocurrencies is important to draw out.
Cryptocurrency mining is a system of introducing new units into circulation via a set of complex computational math equations called blocks. When a block is solved, the machine that solved the equation is awarded a set amount of that cryptocurrency. The process for solving these equations is incredibly energy intensive. However, with cryptocurrency systems like Bitcoin, the amount of money spent on the energy consumed by mining is outweighed by the value of the coin.
Aside from the fact that mining certain cryptocurrencies can be harmful to the environment, the transactions of all cryptocurrencies also require large amounts of energy. This is due to blockchain technology, the foundation of what makes cryptocurrencies what they are. A blockchain is an electronic ledger that is shared between every device working on a network. When dealing with cryptocurrencies, it shows all the transitions of bitcoins. What makes this system so unique and useful is that blockchains are nearly impossible to alter due to how many calculations are needed to verify each transaction. According to a compilation of heavily cited and peerreviewed articles released by Digiconomist, one Bitcoin transaction uses 1773.49 kilowatts of energy. That equates to the amount of energy needed to power an average home in the United States for just over 60 days. To put those numbers
into perspective, that is 8.7 quintillion calculations to verify one transaction. Matt Russel, the director of the Interfaith of Power & Light, an interfaith collective joint in the fi ght against climate change, commented on this issue.
“Nobody seems to have an answer, which is a pretty good indicator that we’re probably dealing with a new technology that’s helpful and interesting but less radically transformative than those who are vested in the development of it for monetary reasons are claiming,” he said.
Weighing the Benefi ts and Drawbacks
The downsides to cryptocurrencies are plentiful, but they also come with advantages that cannot be overlooked. Blockchain networks are the driving force behind the future of cryptocurrencies. When an electronic ledger that is shared with the entirety of network users is virtually impossible to cheat or be changed, it provides transparency that cannot be found in any other system of monetary transactions. Dr. Yu Wang, an associate professor at Iowa State University, gave an example of the technology’s importance to farmers and the production of organic foods.
“The USDA or the FDA do not have the money, time or personnel to go and observe every farmer’s production to make sure they are really producing an organic product… With blockchain
DR. YU WANG, ASSOCIATE PROFESSOR AT IOWA STATE UNIVERSITY technology, that can help us solve part of the validation problem. So, if you are able to actually trace every transaction that’s relevant to the entire life of that specifi c food you may be able to tell if that production process is actually organic or not,” Wang said.
This is one of many examples that underscore the importance of blockchain technology’s use in supporting cryptocurrencies. Another proposed use for blockchain technology is tracking government spending and campaign fi nancing. This could help remedy the transparency problems that plague governments all around the world.
In addition to these blockchain possibilities, because cryptocurrencies are decentralized, they provide advantages normal currencies lack. In a typical centralized currency system (like the U.S. dollar), there is room for price manipulation, infl ation and a range of other problems because a single entity has control over the entire system. Conversely, in a decentralized system, value is determined solely by consumers and their trust in the system. This implies that failure within the system is increasingly less likely to occur than when under a centralized fi at currency because the entirety of the market is decided by those within the market, not a select few.
Weighing the advantages and disadvantages of cryptocurrencies is extremely complex. The scale has dipped back and forth on both sides of the argument, and at this point, it is diffi cult to tell where everything will settle. The massive energy consumption of the Bitcoin system alone is enough to do a massive amount of damage to our already fragile climate, and that doesn’t even account for other popular cryptocurrency systems like Ethereum and Solana. On the other hand, if enacted with good faith in mind, cryptocurrency does have the potential to make a positive impact in the future. Nevertheless, its future hangs in the balance, teetering on whether or not a sustainable solution can be established in regard to its environmental impact.
DIGITAL CURRENCY LANGUAGE DEFINED
All this terminology hurting your brain? Here are some defi nitions of common digital currency terms, according to the Associated Press Stylebook.
Bitcoin: The most popular cryptocurrency system. Other systems include Dogecoin, Ethereum and Solana.
Blockchain: An electronic data structure that holds transactional records. When dealing with cryptocurrencies, it works like a chain of digital blocks that work together to contain records of transactions. These blocks are intricately linked and therefore diffi cult to hack, making it an extremely secure way to store information
Cryptocurrency: A digital currency created and exchanged independent of banks or governments that exist as lines of computer code, essentially using digital fi les as money.
Cryptocurrency Mining: The process of creating new cryptocurrency coins by solving complex mathematical equations.
Fiat Currency: A form of currency declared legal tender and backed by a country’s government instead of a physical commodity like gold. Most coin and paper currencies used throughout the world are fi at currencies. The value of the money is determined by the government, and it retains its value through government and economic stability. The U.S. dollar is an example.
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