## Cleaning Up Crypto ## Source details **Canonical URL:** [Cleaning Up Crypto](https://www.imf.org/en/publications/fandd/issues/2021/09/how-to-make-cryptocurrencies-cleaner-and-greener) ## Other formats - [Markdown version](/en/publications/fandd/issues/2021/09/how-to-make-cryptocurrencies-cleaner-and-greener/index.md) - [Structured JSON version](/en/publications/fandd/issues/2021/09/how-to-make-cryptocurrencies-cleaner-and-greener/index.json) - [Bundle manifest](/en/publications/fandd/issues/2021/09/how-to-make-cryptocurrencies-cleaner-and-greener/bundle-manifest.json) ## Bibliographic details - Authors: ANALISA R BALA - Published: September 2, 2021 --- ### Overview and context - Author: ANALISA R. BALA, senior communications officer in the IMF’s Communications Department. - Publication: F&D Magazine, September 2021. - Key framing: Bitcoin’s carbon footprint is again making headlines; there is a feasible technological change that could dramatically reduce cryptocurrencies’ energy use. ### Environmental footprint of Bitcoin and mining geography - In October, more than 65 percent of bitcoin miners were based in China. - Cambridge University’s Bitcoin Electricity Consumption Index estimates miners burn about 73 terawatt-hours of electricity a year—double Denmark’s usage. - Bitcoin mining emits more than 64 million tons of carbon dioxide into the atmosphere annually—a carbon footprint comparable to that of Montenegro (estimate by Alex de Vries). - A single bitcoin transaction may emit as much carbon as more than 1.8 million Visa purchases. - After China’s government clampdown, many miners are relocating to countries like Iran and Kazakhstan, where electricity comes almost entirely from fossil fuels. - Tesla CEO Elon Musk set a condition for Tesla to accept Bitcoin payments: “when there’s confirmation of reasonable (~50 percent) clean energy usage by miners with positive future trend.” ### Claims and controversies about miners’ energy mix - The Bitcoin Mining Council maintains that as much as two-thirds of miners’ energy use already comes from sustainable sources; this figure is attributed to a survey in which just 32 percent of the network participated. - Alex de Vries questions the survey’s scope: “It’s not clear at all what’s included in their survey,” and argues that “Countries just don’t have the capacity to supply renewable energy for mining.” - De Vries: miners “have no incentive to care about clean energy” and will flock to wherever electricity is cheapest and supply is stable. ### Consensus mechanism alternatives and potential energy savings - Bitcoin uses “proof of work”: miners solve complex puzzles; faster and more efficient miners earn more bitcoins, driving high computing and electricity demand. - “Proof of stake” is an alternative: validators put down a “stake” of cryptocurrency, are selected at random, and are rewarded proportionally; false attestation can result in losing the stake. - De Vries: moving from proof of work to proof of stake can “reduce the energy consumption by around 99.95 percent.” - Several blockchains use forms of proof of stake: Cardano, EOS, Polkadot, and Tezos. - Ethereum (the second-largest cryptocurrency by market capitalization) plans to move to proof of stake; if successful, the move could encourage others and reduce crypto’s carbon footprint. ### Technical and economic constraints on shifting consensus mechanisms - Designing a proof-of-stake blockchain that is scalable and preserves security and decentralization is characterized as nearly impossible—referred to as the “scalability trilemma” by Vitalik Buterin. - Fahad Khan (Asian Development Bank): “You can’t have the most perfect outcomes for all three characteristics. At best you can have two.” - Khan: “I don’t think proof of work is going away” in the case of Bitcoin. - John Kiff (former IMF financial sector expert): Bitcoin’s use case differs from Ethereum’s—Bitcoin aspires toward a unit of account or money, whereas Ethereum aims to replace internet third parties with decentralized applications and contracts using ether. *F&D Magazine article “Cleaning Up Crypto,” ANALISA R. BALA, September 2021.* --- ## Content in this bundle - **أوراق العملة** - [أوراق العملة (Markdown version)](/-/media/files/publications/fandd/article/2021/september/ar/currencies.pdf.md){rel="alternate" type="text/markdown"} - [أوراق العملة (PDF)](/-/media/files/publications/fandd/article/2021/september/ar/currencies.pdf){rel="external" type="application/pdf"} - **Criptomonedas menos contaminantes ● Finanzas y Desarrollo ● Septiembre de 2021** - [Criptomonedas menos contaminantes ● Finanzas y Desarrollo ● Septiembre de 2021 (Markdown version)](/-/media/files/publications/fandd/article/2021/september/es/how-to-make-cryptocurrencies-cleaner-and-greener.pdf.md){rel="alternate" type="text/markdown"} - [Criptomonedas menos contaminantes ● Finanzas y Desarrollo ● Septiembre de 2021 (PDF)](/-/media/files/publications/fandd/article/2021/september/es/how-to-make-cryptocurrencies-cleaner-and-greener.pdf){rel="external" type="application/pdf"} - **Dépolluer les cryptomonnaies** - [Dépolluer les cryptomonnaies (Markdown version)](/-/media/files/publications/fandd/article/2021/september/fr/how-to-make-cryptocurrencies-cleaner-and-greener.pdf.md){rel="alternate" type="text/markdown"} - [Dépolluer les cryptomonnaies (PDF)](/-/media/files/publications/fandd/article/2021/september/fr/how-to-make-cryptocurrencies-cleaner-and-greener.pdf){rel="external" type="application/pdf"} - **Making Cryptocurrencies Cleaner and Greener - IMF F&D** - [Making Cryptocurrencies Cleaner and Greener - IMF F&D (Markdown version)](/-/media/files/publications/fandd/article/2021/september/how-to-make-cryptocurrencies-cleaner-and-greener.pdf.md){rel="alternate" type="text/markdown"} - [Making Cryptocurrencies Cleaner and Greener - IMF F&D (PDF)](/-/media/files/publications/fandd/article/2021/september/how-to-make-cryptocurrencies-cleaner-and-greener.pdf){rel="external" type="application/pdf"} - **Повышение экологичности криптовалюты** - [Повышение экологичности криптовалюты (Markdown version)](/-/media/files/publications/fandd/article/2021/september/ru/currency.pdf.md){rel="alternate" type="text/markdown"} - [Повышение экологичности криптовалюты (PDF)](/-/media/files/publications/fandd/article/2021/september/ru/currency.pdf){rel="external" type="application/pdf"} - **让加密货币更加绿色环保 - 金融与发展 - 国际货币基金组织季刊 2021年9月号·第58卷·第3期** - [让加密货币更加绿色环保 - 金融与发展 - 国际货币基金组织季刊 2021年9月号·第58卷·第3期 (Markdown version)](/-/media/files/publications/fandd/article/2021/september/zh/currency.pdf.md){rel="alternate" type="text/markdown"} - [让加密货币更加绿色环保 - 金融与发展 - 国际货币基金组织季刊 2021年9月号·第58卷·第3期 (PDF)](/-/media/files/publications/fandd/article/2021/september/zh/currency.pdf){rel="external" type="application/pdf"} --- _Source: https://www.imf.org/en/publications/fandd/issues/2021/09/how-to-make-cryptocurrencies-cleaner-and-greener_