25 September 2020
People talk or write about the several factors to learn, secure, gain, or invest in cryptocurrency, however, what goes unnoticed is the energy that cryptocurrency and its technology use.
Digiconomist estimates that the mining of the Bitcoin accounts for almost 0.29% of the annual consumption of the electricity in the world. The mining of a single block of Bitcoin consumes energy of about enough power than to 28 U.S. homes in a day. Alex de Vries, a Bitcoin specialist at PwC, states an estimation that the global power consumption for the mechanism that serves bitcoin’s software is 2.55 gigawatts and that too is it’s minimum estimated unit, while the energy consumed is 22 terawatt-hours per year. While CBECI states that the Bitcoin network globally consumes electricity of more than 7 gigawatts and around 64 TWh of the consumption of energy over a period of a year.
And this is just not for the energy taken for mining of Bitcoin but other cryptocurrencies too.
Blockchain technology is the underlying mechanism used for the process of cryptocurrency to occur. The mining process in Cryptocurrency in an easy term can be defined as a process that solves complex mathematical equations or problems to generate new cryptocurrency of its particular network. Hence, the process consists of the time period of 10 minutes, and the computer that solves the equation progressively receives a reward which is majorly in cryptocurrency itself.
The network of Bitcoin, states the site, “is designed to produce a constant amount of bitcoin every 10 minutes.” Meaning whenever the miner joins the Bitcoin network, the scale of the problem or the equation will be difficult every 10 minutes so as to gain the reward even of no matter the amount of processing power you utilize to solve.
David Malone, a lecturer in Ireland’s Maynooth University says,
“the proof-of-work scheme requires guessing the solution to an equation (actually, an inequality).” “The guessing uses lots of computing power and consequently, electricity.”
Also, 99Bitcoins calculated and stated that bitcoin mining with advanced computer hardware for over a month would consume 1,375kW of electricity costing the user $118.
The more need for computing power, the more is the need for electricity to enhance. Hence, the whole cycle with reference to the process of mining any cryptocurrency is vicious and eventually affects the consumption of electricity.
Also, there is another cycle aspect to this, the more the value of Bitcoin, the more the miners would participate leading to more usage of computing power and consumption of electricity.
As Malone said,
“So, while the value of bitcoin is higher than the cost of electricity, we can only expect more people to jump in, increasing the overall energy demands.”
Bitcoin is just not the only cryptocurrency that utilizes such an amount of energy but there are other cryptocurrencies too. And apparently it will keep increasing as the cryptocurrency is popularized and will eventually make the need for consuming energy at a much higher rate.
As they say, “Where there’s a will, there’s a way.” The community of cryptocurrency is well aware of the situation and many of them have come out with various solutions to decrease the weightage.
Joseph Bonneau, a cryptographer and an assistant professor of computer science at New York University said,
“Some systems use a semi-centralized model (like Ripple or Stellar) that are more green, but the trust assumptions are different than a fully decentralized system like bitcoin.”
However even if a new way is created to lessen the weightage, it is yet trouble as the key underlying problem is the mining process. The bitcoin and any other PoW mining schemes will consume the energy - either way. Mining for any cryptocurrency network will always consume energy at a rate.
Bonneau also says,
"almost entirely to mining; that is, to solving computational puzzles. There are other energy costs of the system, like maintaining the system history, broadcasting and verifying new transactions, but those energy costs are trivial compared to the mining."
Yet many developers have come around a different solution to overcome by the help of utilizing an entirely different mining process, also called as Proof-of-Stake (PoS). Cryptocurrencies such as DASH or PIVX do not use PoW, as stated by Malone. Rather the user locks up the quantities of a cryptocurrency over a time period that leads to securing the blockchain which is utilized by the particular currency and eventually receives crypto reward giving a reflection of mining the cryptocurrency themselves.
Many countries claim that the energy used by the cryptocurrency process consumes is more or the same as its countries such as Serbia, Ireland, and Switzerland. Cryptocurrency if often question to disrupt the financial system but it is also equally important to understand its effects on the environmental cycle.