Cryptocurrency mining not good for environment, the rising concerns on energy usage
If you ever feel already well informed about cryptocurrency then it would be surprising knowing that cryptocurrency actually affects our environment. Wait a minute, that is a mouthful, right? Look here, we are in a climate crisis, at least as the scientists put it and therefore anything that touches on the environment automatically becomes sensitive. But then how did we even get here to talk about cryptocurrency interfacing with the environment? The crux about all these is in cryptocurrency mining.
Cryptocurrency mining at a glimpse
Any inquisitive investor in cryptocurrency must somehow question where exactly these digital currencies come from. We already know that our fiat money is minted and printed by certified bureaus. The central bank of respective countries take charge of how the money minters and printers operate until it enters the circulation. But cryptocurrencies are mined.
At first mention, you can be forgiven to imagine that cryptocurrency mining involves people going out like geologists into a mine, drilling shafts and using complex equipment to pull out crypto from the underground. But, in the world of financial technology, crypto mining means and entirely different thing and comes with concerns about energy demands. The full details about cryptocurrency mining can be found here.
Cryptocurrencies mainly rely on the technology of proof of work. Just like the mining industry for minerals, the crypto industry has significant environmental consequences. How is this possible? The logic is easy to follow at least when you know how cryptocurrencies are birthed. Mining cryptocurrency is a long, tedious and cumbersome projects that involve so many computers racing to solve complex mathematical problems. The process is not only high tech but also expend a lot of energy.
Digital currencies are in such a way that they are difficult to mine. Also, a lot of computing power help in generating the coins as no intermediaries are required. Since everyone in the network wants to be the first in solving the problem, the individual who has the most processing power is the one who will likely win. Thus, it results in larger mining rigs in computing the equation fast.
The things that affect crypto mining operations volume include the availability of electricity and price. Therefore, in a case where the cost of electricity is cheaper in one nation as compared to another one then it is better to operate where it is cheap. Also, it is important to note that crypto’s environmental influence is not directly proportional to carbon emissions.
Mining of Crypto
In understanding the environmental effects of cryptocurrency, it is important to first understand the creation of the coins. Since any authority does not regulate cryptos, it mainly relies on users in validating transactions. Also, the strategy helps in updating the blockchain with new information. The blockchains have to be challenging and costly to verify in protecting the bad actors who may try to manipulate information.
Cryptos run in a decentralized system. When the computers in a network process and verify transactions, new cryptos are mined or created. The miners or network computers process the transactions while they exchange them with crypto payment
Environmental concerns about Cryptocurrency
The computation of crypto carbon footprint is more challenging. Even though fossil fuels are the source of energy in most nations, miners have to look for inexpensive energy sources. This helps in remaining profitable.
Proof of work is the consensus mechanism and it gives the users the chance of validating crypto transactions. This is because it solves challenging mathematical problems. Recently, New York State introduced a bill that will prohibit the crypto mining operations which run on the carbon-based power sources.
In crypto, the first individual to solve a puzzle is responsible for validating the transaction. Thus, the person gets an award in form of a fixed crypto amount. After that, the cycle begins again. This is the method that most people use.
The mining of crypto generates a certain amount of electronic waste. This happens when mining hardware turns obsolete. It is mainly true for the miners of Application-Specific Integrated Circuit (ASIC). The ASIC is a specialized machine that is developed for mining the popular cryptos including Bitcoin and Ethereum. On May 27, 2022, Digiconomist argued that the Bitcoin network generates about 35, 000 tons of electronic waste yearly.
Every moment that individuals try to mine more cryptos such as Bitcoin, the competition increases. The more there are machines in the market, the more complicated mining of bitcoin becomes. Therefore, there is competition, more machines, people competing with each other, and mining. Bitcoin generates about 132.48 terawatt-hours (TWh) yearly.
Why Do Crypto Mining Need Energy?
Crypto mining energy intensity is a feature of great concern, especially to the sworn stewards of nature. Like when mining the physical gold, some amount of energy gets used up in crypto mining. It is the same case with crypto where large amounts of energy are needed. The system is in a way that makes it expensive for an actor to take control of the whole cryptocurrency network.
As I said earlier, crypto is a decentralized currency. The centralized currency needs some energy too because there are some people who make things possible such as the ones working in banks. Therefore, since crypto works without relying on a central network, miners use a lot of power. It helps in maintaining security as well as enhancing operations.
Reducing the Environmental Impacts of cryptocurrency
Efforts have always been underway in making crypto green. Some include the utilization of methane gas from the fossil drilling which never burn off. Besides, another way of making crypto green is by setting plants in regions with the abundant wind. An example is West Texas. However, with the current crypto winter, it may be difficult to achieve them. This is because the process is expensive while the prices of Bitcoin are tumbling.
Currently, developers are looking toward reducing the energy cost used in crypto mining. One of them is through the use of proof of stake (PoS). This system relies on the amount of specific crypto that a user has agreed to hold or stake but not to sell. In such as system, every individual is a validator who may validate transaction authenticity in the blockchain. The individuals get to be randomly chosen after which a number of validators must agree on the transactions. After the creation of a block, the validators get coins as their rewards.
The system uses less power as compared to proof of work. For instance, Ethereum is working toward using PoS in the verification of new blocks. Other methods that use less energy traders can adopt include proof of capacity, proof of burn, proof of elapsed time, and proof of history.
As much as crypto has an impact on the environment, there are two major factors that contribute to greener crypto mining. They include location climate as well as renewable energy sources. The nations that mainly rely on fossil fuels have a high environmental impact. On the other hand, the ones using nuclear, solar, wind, or hydropower energies use less energy.
So this is exactly why crypto mining overstretches energy
Since crypto uses a decentralized system, the energy needed in processing the coins is high. However, you have to use it as it is the most secure method that helps in preventing fraud. The disadvantage that it has is that at times people may over use it.