Cryptocurrency is an internet-based form of exchange that exists solely in the digital world. Its allure comes from using a decentralized peer-to-peer network of exchange, produced and recorded by the entire cryptocurrency community. Independent "miners" compete to solve complex computing algorithms that then provides secure cryptographic validation of an exchange. Miners are rewarded in units of the currency. Digital public ledgers are kept for "blocks" of these transactions, which are combined to create what is called the blockchain. According to proponents, cryptocurrencies do not need a third party, or traditional bank, or centralized government control to provide secure validation for transactions. In addition, cryptocurrencies are typically designed to limit production after a point, meaning the total amount in circulation eventually hits a cap. These caps and ledgers are maintained through the systems of users.

But the mechanisms that make these currencies so appealing are also using exorbitant amounts of energy. The independent production, or 'mining', practices of cryptocurrencies are done using energy-consuming specialized computer hardware and can take place in any geographic location. Large-scale operations, called mining camps, are now congregating around the fastest internet connections and cheapest energy sources -- regardless of whether the energy is green or not.

The researchers argue that although mining practices create financial value, the electricity consumption is generating "cryptodamages" -- a term coined to describe the human health and climate impacts of the digital exchange. 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. The researchers estimate that in 2018, every $1 of Bitcoin value created was responsible for $.49 in health and climate damages in the United States. Those damages arise from increased pollutants generated from the burning of fossil fuels used to produce energy, such as carbon dioxide, fine particulate matter, nitrogen oxides and sulfur dioxide. Exposure to some of these pollutants has been linked to increased risk of premature death.

One central issue that complicates the debate about the environmental impact of digital currencies is the fact that it is exceedingly difficult to measure the impact itself. Considering that bitcoin and most other digital currencies are anonymous, generating a reasonable estimate of worldwide energy usage trends associated with this industry is problematic. Between pessimistic analysts and defensive miners, who is right in the debate over the impact of digital currencies on the environment? While the amount of energy used in the mining process is huge, analysts don’t necessarily agree on the exact figures. Beyond that, there’s one line of thinking that suggests that the benefits of digital currencies, including added efficiency in payment processing and the ability to help individuals avoid inflation, may actually outweigh the environmental toll.