In 2021, when China banned bitcoin and other cryptocurrencies, crypto miners flocked to the United States in search of cheap electricity and looser regulations. In a few short years, the U.S.’s share of global crypto mining operations grew from 3.5 percent to 38 percent, forming the world’s largest crypto mining industry.
The impacts of this shift have not gone unnoticed. From New York to Kentucky to Texas, crypto mining warehouses have vastly increased local electricity demand to power their 24/7 computing operations. Their power use has stressed local grids, raised electricity bills for nearby residents, and kept once-defunct fossil fuel plants running. Yet to date, no one knows exactly how much electricity the U.S. crypto mining industry uses.
That’s about to change as federal officials launch the first comprehensive effort to collect data on cryptocurrency mining’s energy use. This week, the U.S. Energy Information Administration, an energy statistics arm of the federal Department of Energy, is requiring 82 commercial crypto miners to report how much energy they’re consuming. It’s the first survey in a new program aiming to shed light on an opaque industry by leveraging the agency’s unique authority to mandate energy use disclosure from large companies.
“This is nonpartisan data that’s collected from the miners themselves that no one else has,” said Mandy DeRoche, deputy managing attorney in the clean energy program at the environmental law nonprofit Earthjustice. “Understanding this data is the first step to understanding what we can do next.”
So this article is obviously slanted in favor of cryptocurrencies.
And there's the rub, we can't really know for sure what the cryptocurrency landscape looks like in terms of energy use. We do know cryptocurrency mining/processing will be attracted to lower cost energy and lower income taxes.
The author shows a lot of examples of how cryptocurrency mining can be eco-friendly, but we don't know if it actually is eco-friendly. For example, how likely is it that cryptocurrency miners would try to either steal energy (e.g. this example)? What about other types of energy fraud? Since cryptocurrency mining isn't constrained by borders, there's a huge incentive to go somewhere they can get away with cheaper operation costs, regardless of ethics.
That said, if we can move away from mining to just verifying transactions (e.g. proof of stake), that would cut energy use significantly.
But regardless, cryptocurrencies need to generate actual value to the average person. If they remain primarily used for speculation, people won't see the value. I think cryptocurrencies have a lot of potential, but they need to prove their worth. Make them better than traditional money (e.g. faster, cheaper transactions), and people may actually use them. To quote another part of the article:
What? Crypto currencies proved their worth Long before speculators joined the scene
Unfortunately, theres no way to keep speculators out
Maybe on the theoretical level, but cryptocurrencies just aren't practical. For example:
These make it impractical as a replacement for other currencies in most cases. Yes, there's a use case for those who cannot use traditional currencies for whatever reason (e.g. political refugees), but not for the everyday person.
So until it actually solves problems the average person has, it's going to stay in the realm of speculation.