Cryptodamages: Monetary value estimates of the air pollution and human health impacts of cryptocurrency mining
by Volker Weber
Andrew L.Goodkind, Benjamin A.Jones, Robert P. Berrens, University of New Mexico, Albuquerque, USA:
Cryptocurrency mining uses significant amounts of energy as part of the proof-of-work time-stamping scheme to add new blocks to the chain. Expanding upon previously calculated energy use patterns for mining four prominent cryptocurrencies (Bitcoin, Ethereum, Litecoin, and Monero), we estimate the per coin economic damages of air pollution emissions and associated human mortality and climate impacts of mining these cryptocurrencies in the US and China. Results indicate that in 2018, each $1 of Bitcoin value created was responsible for $0.49 in health and climate damages in the US and $0.37 in China. The similar value in China relative to the US occurs despite the extremely large disparity between the value of a statistical life estimate for the US relative to that of China. Further, with each cryptocurrency, the rising electricity requirements to produce a single coin can lead to an almost inevitable cliff of negative net social benefits, absent perpetual price increases. For example, in December 2018, our results illustrate a case (for Bitcoin) where the health and climate change "cryptodamages" roughly match each $1 of coin value created. We close with discussion of policy implications.
Comments
74% of mining operations driven by renewable energies?
If we use the renewable energy, that is used for mining operations in a sensible way, we probably could shut down some generators powered with fossil fuels.
I would expect that the energy consumption (production, maintenance) of classic currencies to be significantly higher than the one of crypto.
@Axel
I assume they setup the mining farms in remote places where the generators are not connected to the main grid. Using conventional electricity supplier is way to expensive - all over the world. But it is quite simple to use/install hydropower stations in remote areas. While it works for mining it does not work for traditional industries as the missing connection or the reliable energy production are the real challenges there.
However, mining is in constant flux and there have been rumors about Iran considering entering the mining business. And no, they do not have hydropower in mind. So what might be true today might take a really ugly turn tomorrow.
Stephan Bohr wrote: I would expect that the energy consumption (production, maintenance) of classic currencies to be significantly higher than the one of crypto.
Nope, it isn't. The problem with crypto mining is, that we waste energy/money by letting the computer do tons of absolutely useless calculations, only to minimise the creation of new money. Real money does not need this mechanism, because it's quantity is regulated by fiscal mechanisms.
@Axel. Look at the map where the regions for mining are and than do you still think, that all these regions are not connected to a grid?
"Proof of work" is a waste of energy. Time to move on.
@Christian
regulation for "real money" seems pretty relaxed at the moment. the fiscal mechanisms you tout, are just politics in the end. people like you and me deciding whether another trillion "real monies" are issued at the stroke of a keyboard.
if bitcoin can bring an end to QE, deficit spending and the fed dominated FIAT press, without devastating environmental impact, we'd be better off.
@ Maximilian
Well, Bitcoin is in fact the poster child of FIAT money. It has no intrinsic value whatsoever. The difference in supply and demand has led to huge value fluctuations and this would have a very negative effect on any economy. The idea behind LIBRA is way better.
QE is just one instrument in any central banks arsenal. It has proven very usefull in the past to regulate the money supply and does it currently for Europe.
The most important central banks in the world are completely independent from gouvernments. A fact that annoys some leaders with great and unmatched wisdom quite a bit.
BTW, most central bank were founded, because money supply grew out of hand and led to economic crisis. Most of them do a good job, as long as "world leaders" leave them alone.
Deficit spending has nothing to do with central banks, money supply, QE or FIAT. That would not change with bitcoin as an alternative money.
Bitcoins intrinsic value is that it is censorship proof and immutable. You can't move FIAT or sizable amounts of Gold between countries, without being subject to government oversight. Bitcoin fixes this.
Bitcoin is just 10 years old and volatility is decreasing already, and will flatten out even more the next 10 years.
Your trust in governments and central banks independence is commendable, but not close to reality i.e. Nixon Shock, ECB president appointed by EU heads of state.
Deficit Spending with a deflationary and immutable currency would be greatly reduced since governments couldn't just raise taxes indefinitely and seize your assets to pay-off their debts, or advise their central banks to issue new money.
There are two schools of thoughts. The one you subscribe to, and the other one, which sees Bitcoin as a rigged casino at best, a playground for all financial crimes banned in regulated markets and a money laundering vehicle at worst. You will have to live with that.
Maximilian, that‘s all nice and well, but can we have that without wasting so much resources without actual value creation, please? If at least the calculations would be valuable and drive relevant new insights...
