Did you know that some cryptocurrencies are not eco-friendly? The main reason for that is cryptocurrency mining. How so?
As you know, Bitcoin runs on a decentralized network, and each node in the network is a miner (or the computing device is, to be precise). Whenever anyone makes a purchase with bitcoin, or whenever any other type of transaction takes place on the network, it has to be approved by every node and stored on every device that’s part of the network. However, only one miner gets the right to add the transaction to the chain and get rewarded for it by mining a new BTC unit.
Which miner receives the prize? Well, it’s decided by the Proof-of-Work (PoW) mechanism. Miners compete with other participants of the network by solving complex mathematical riddles, and to do that, they need plenty of computing power. Some spend as much as an average of 170 US homes a month on their BTC mining venture, meaning that leaving a carbon footprint has become a reality.
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High-Energy Inputs Are a Bitcoin Feature
As bitcoin became more popular, more people joined the mining craze and invested more money into powerful mining rigs that used a huge amount of electricity to solve algorithms and got rewarded for that.
Whenever the price of bitcoin goes up, new miners join, and more computing power is used to run the network. So far, the all-time high electricity consumption was 132 TWh, an equivalent of the entire country of Sweden. The thing is, bitcoin is still being discovered by many people and invested in, meaning electricity consumption can go even higher than that.
Alternative Energy for Mining
In most parts of the world, electricity is created by thermal power stations. The way we make electricity is one of the reasons for global warming. The good news is that there are alternative energy origins, such as wind and solar power plants, and they are already being installed around the world.
It’s no secret that many brilliant minds are trying to solve the bitcoin mining problem, and one of the ways to do that is to create alternative energy sources that will only be dedicated to mining BTC and other cryptocurrencies. For example, there’s a plan to build wind and solar power plants in Texas that will be devoted to miners and alleviate the strain we put on the atmosphere when mining BTC.
Getting Out of the Energy Costs of Habitual Mining
There are several other ways to decrease carbon emissions, stay eco-friendly, and still mine cryptocurrencies.
Perhaps one of the most popular ways to do it nowadays is through cloud mining. Essentially, you’ll just rent computing power from a company specializing in mining cryptocurrencies and mine bitcoin (and other cryptos based on the PoW consensus mechanism). That way, you won’t have a huge electricity bill, but you’ll still have to pay for cloud mining services. This might reduce some impact on the environment, but there will still be machines consuming electricity and mining for you.
Another way is to use the electrical power of your household appliances to mine BTC, but this idea is still very new and revolutionary, so we have to wait and see how well it will work in real life.
You can mine coins on a blockchain network that uses a different consensus. For example, Ethereum is making the transition to Proof-of-Stake (PoS), meaning miners need to invest (stake) their ETH to run the node. This way, there are no power-consuming computation processes going on, as there’s no need to solve algorithms to determine who gets paid.
Instead, the PoS mechanism is much more eco-friendly. Unfortunately, it also comes with some downsides, with the most relevant being the lack of security that PoW provides. Also, validators (people who stake) with huge stakes can have a much larger influence on running the network, which makes PoS blockchains prone to centralization.
Finally, Bitcoin’s system is created in such a way that the amount of the rewarded BTC halves after certain milestones are reached. In other words, the number of miners might stop growing at one point if the incentive is not high enough to cover their electricity expenses. It’s a self-sufficient system but will still only partially solve the power consumption problem.
Conclusion
Bitcoin is more popular than ever, and bitcoin mining can become a lucrative business if the overall BTC price continues to go up. However, it’s also very inefficient from the perspective of energy consumption, as most of the computing power is spent on solving algorithms to decide who gets the incentive. Therefore, miners are searching for alternatives to make their mining venture eco-friendly without compromising its effectiveness.
