The pandemic has been a significant factor in making cryptocurrencies such as Bitcoin, Tether and Ethereum a mainstream phenomenon.
Users are able to buy Litecoin and other cryptocurrencies and trade them all over the world easily. Since the creation of cryptocurrencies as an established idea, it has become a notable name in the finance and tech sectors. By gaining substantial attention worldwide, cryptocurrencies have attracted a few concerns from environmentalists and ecologists over their high energy consumption and wastage.
This article will walk you through the environmental aspects of cryptocurrency mining, how their rapid growth became a thing to worry about for the environmentalists, and what progress is being made to make it more eco-friendly.
What is Cryptocurrency Mining?
Cryptocurrency mining is the process through which new coins are added to the existing circulation. Through cryptocurrency mining, the authentication of transactions and the development of the ledger also take place. The process of mining is performed by using advanced and ultra-modern computer systems to solve complicated mathematical problems. The first miner to solve the complex problem is awarded a block of cryptocurrency, and the process begins again.
Cryptocurrency mining is quite costly, hectic and very occasionally compensating. Nonetheless, mining has a magnetic allure for many cryptocurrency investors since miners are paid with crypto tokens for their efforts. This might be like California gold prospectors in 1849; entrepreneurs saw mining as a source of pennies from heaven, and why not do it if you are technologically inclined towards it?
Why Does Cryptocurrency Mining consume so much Energy?
Digital currencies were designed in such a way as to require much computing and intellectual power so that not a specific individual or group can control the whole network; instead, it is equally divided all over the ledger, making it decentralized, hence no single point of control.
Cryptocurrencies like Bitcoin and Ethereum use POW (Proof-of-Work) systems to ensure authenticity and the creation of new coins through the process of mining. One of the significant reasons to create POW was to stop cyber-attacks, identity thefts and fraudulent activities on the blockchain.
Now, in order to win and solve the problems before everyone, cryptocurrency miners use high computational powers and larger mining rigs. Since the size of the mining network is directly proportional to the energy used, miners are determined to work with larger units to increase the winning chances. Hence, ever-increasing amounts of energy are being used to perform the process of cryptocurrency mining.
The cost of electricity can also affect the volume of cryptocurrency mining; for example, if electricity is cheaper in one country, miners will be attracted to that place and will try to make it a business standpoint which will not only increase the overall electricity consumption of the country but also severely impact its energy consumption.
Now, the thing to observe is higher energy consumption means higher carbon dioxide emission. According to Digiconomist, Bitcoin mining emits around 96 million tons of CO2 each year, which is comparable to the emissions produced by several smaller nations collectively. Similarly, mining for Ethereum emits 47 million tons of carbon dioxide annually.
Not only energy resources are wasted, but also electronic waste such as mining hardware becomes obsolete.
Most of the time, cryptocurrency miners prefer to relocate to places where energy resources are abundant, and electricity is cheap without worrying about the harmful impacts on the environment. But it is not necessary for the mining process to be energy-intensive.
Using the POS (Proof-of-Stake) systems instead of POW (Proof-of-Work) systems to mine new coins into circulation can reduce the consumption of high computational power and extreme carbon dioxide emission. Instead, the ability to validate transactions and manage the crypto network is awarded depending on how much bitcoin a validator has “staked” or decided not to trade or sell.
Bitcoin, Tether and other cryptocurrencies might be used to incentivize more effective use of renewable energy.
Miners, in conjunction with storage project investment, might assist in balancing supply and demand difficulties, making renewable energy production more economical.
Some other methods such as POH (Proof-of-History), POET (Proof-of-Elapsed Time), POB (Proof-of-Burn), POC (Proof-of-Capacity) are also being established. None of these rely on intensive energy consumption and high wastage, such as in POW (Proof-of-Work).
These techniques can all help to minimize the energy costs and consumption of the cryptocurrency market and crypto mining, but the concerns of e-waste and other environmental effects must be addressed more dynamically if cryptocurrency is to be long-term viable.