That’s the common quote that is thrown around about crypto mining and the effect it has on the planet. While Ireland’s population is quite small with its less than 4.8 million people, the power consumption of Bitcoin is still often underestimated. It is odd to think that just one currency might consume the same amount of energy every year as 6.3 million US households.
But is it such a crime that the financial revolution which is changing the world needs a little juice to get going? Let’s look deeper into the situation.
Using electricity in and of itself is fine. Electricity itself is part of nature; it’s not like Styrofoam that was created in a contamination-free lab by scientists in white coats. The environmental hazards lie in HOW electricity is generated.
Despite it being 2018, there are many countries still using coal and gas in their power plants. A disturbing piece of news really brought attention to the issue, when a decommissioned coal mining plant in Australia was purchased by a Bitcoin mining company, to be reactivated solely to power bitcoin mining equipment. Seems like we’re moving backwards now, in the effort to keep our air clean and ozone layer intact.
However, there is a significant movement and belief that says we can have cryptocurrency mining and a clean environment at the same time. According to research conducted at ICObench.com, there are 54 mining companies alone that started in the last 2 years, which boast using renewable clean energy that powers their mining rigs, using either solar, hydrogen, wind power, or a combination of the three.
A handful of other mining farm startups claim special rate deals from local power plants, but ultimately that will struggle to compete with the rates of sun rays and hydro dams. There’s even a project for creating electricity through a magnetic vacuum, which is an interesting innovation by itself. While there is no telling yet if this really works on a large scale, necessity once again is driving technology forward.
“Bitcoin is currently using 0.31% of all the world’s electricity.” – The Digiconomist
Why does Bitcoin need all that energy, when many other coins don’t?
To create Bitcoins, by far the most valuable currency at this time, you have to use a mining rig, which is a powerful computer that performs calculations of random math problems, and submits the result to the blockchain. Every 10 minutes, one of those results will be right and is chosen to receive a block reward (contains a certain number of Bitcoins, which decreases over time), currently that reward is worth almost 100 thousand dollars. This method of creating coins is called Proof of Work.
This has another function though, as well. It keeps your network decentralized, so no one or a small handful of people control it. Proof of Work ensures the validity of transaction better than any other consensus method so far.
This was an excellent way to do things, in theory, for many years. However, now that industry has got involved, there really are only a small handful of companies with large enough infrastructure to mine the majority of bitcoins. The vast majority of calculations solved per second (known as the network hashrate) is currently controlled by 7 major pools. That’s not at all what a decentralized network looks like, and is not what The Bitcoin Foundation intended.
Bitcoin is not the only coin consuming tremendous amounts of energy. Ethereum is the next largest coin, around 1/3rd the size of Bitcoin. Their founder is considering changing the consensus mechanism so no more coins can be mined, and going to a Proof of Stake system, which is extremely more energy-efficient.
But then there will be another problem – new coins are given based on how many coins people already have. A powerful investor could easily just purchase the majority of the coin (several billions of dollars) and essentially own the entire network.
There are many other types of consensus, which is discussed in a different article. Until more time and trials have passed, it does appear that Proof of Work currently is the best way to secure a cryptocurrency network.
As with demand, supply must grow in kind. What happens when all of the current renewable energy sources are not enough? Bitcoin miners simply invest in building more renewable energy infrastructure. When new consensus methods are discovered and mining is either obsolete or much more energy-efficient, this surplus renewable energy will then trickle into the rest of the grid, causing fossil-fueled plants to slow, and eventually shut down.
While currently, the electricity consumption by Bitcoin may be a problem, in the long-term it could very well lead to a much cleaner energized Earth.