After the #CryptoCrash, Will Bitcoin’s Climate Crash Be Next?
by Greenpeace USA
November 23, 2022
The FTX crash must be a wake up call for blockchain investors: clean up your act, and your pollution, or Bitcoin will become just another obsolete technology in the dustbin of history.
If you’ve been watching the news, you’ve probably heard about the implosion of FTX, the world’s second largest cryptocurrency exchange. On its face, this story might feel like another story about a financial scandal — but dig a little deeper, and the potential implications for crypto markets, and our climate, are major.
The bottom line is this: a lot of ordinary folks lost a lot of money this year on cryptocurrency, and with the demise of FTX, could lose a lot more. People are scrambling, scared, and they are wondering if they can trust any cryptocurrencies ever again.
This carries major implications for the crypto trading giants that remain: the huge potential impact of the hidden financial risks and liabilities from climate pollution they are carrying off their balance sheets. We believe this real risk should be acknowledged and that, to address it, crypto trading platforms should champion a change to Bitcoin’s energy-wasting code.
In short, this is an opportunity not to look backwards at the FTX collapse, but a call for the industry to learn from this latest shock and proactively address the looming problem of its climate impact.
Here’s what we know:
- Trading platforms like FTX that have supported millions of Bitcoin transactions tied to energy-intensive “mining” that impacts communities and our climate;
- Regulators, companies, and investors are increasingly concerned about climate risk;
- Carbon emissions from Bitcoin mining have skyrocketed in recent years, using more electricity from dirtier sources. Coal is now the top source of electricity for Bitcoin mining globally. In the last few years, Bitcoin mining operations have restarted and rejuvenated coal and other fossil fuel power plants in the U.S.;
- Companies like financial asset managers and banks that have climate commitments will have to address the substantial carbon emissions resulting from the trade of Bitcoin;
- After Ethereum’s switch from electricity intensive Proof of Work (PoW) mining to a much more efficient protocol, the calls for Bitcoin to address its climate impacts as well have increased;
- Crypto trading platforms should publicly champion efforts to change Bitcoin’s code to do away with the need for wasteful Bitcoin mining;
- To rebuild trust, crypto platforms need to defuse this “carbon bomb” before it disrupts the system like other shocks have;
We think it is important for everyday investors along with big institutions promoting Bitcoin business, like Fidelity Investments, Blackrock and Mastercard, to be aware of the huge climate liability crypto trading companies are carrying off their balance sheets.
When, not if, those companies have to address their carbon footprint from Bitcoin transactions, it could create a new shock to trading platforms and the broader crypto space.
But the industry does not need to sit back and wait for the next shock. Crypto trading platforms can solve their carbon liabilities by championing efforts to innovate and change Bitcoin’s code.