The vision behind cryptocurrency has been to free money from the centralized control of banks and other financial intermediaries—and ultimately to replace the current sovereign-based financial system. But to achieve its aspirations, cryptocurrency uses technology that demands massive amounts of energy. Its climate impacts simply cannot be ignored.

To understand what cryptocurrency is and how it works, consider how financial transactions ordinarily occur today. Every time consumers complete a transaction without cash, the transaction must be validated through an intermediary in the form of a bank. The banks operate with additional intermediaries in the form of the U.S. Board of Governors of the Federal Reserve System or the European Central Bank. All this intermediation involves some small transaction costs, but also gives rise to concern about the value of the currency because the Federal Reserve can essentially print money. Orthodox economic theory teaches the more money created by central banks, the greater the risk of inflation. That does not mean that intermediation is not good though. It has, after all, succeeded in financing considerable economic growth for decades.

The cryptocurrency revolution intends to reduce the cost of intermediary transactions by using a distributed ledger system: Blocks that form part of a blockchain are used to validate the so-called reality of each cryptocurrency. The most well-known and biggest cryptocurrency is Bitcoin, but there are other big ones too, such as Ethereum. They are validated by a process called “mining,” which means that mathematical problems have to be solved by “miners,” who are rewarded with a…