Unquestionably, the mining of cryptocurrency, and Bitcoin specifically, takes up significant amounts of energy. If you’re not sure what mining means in this sense, it is the necessary process to produce new forms of cryptocurrencies, which are cultivated and added to the blockchain ledger. It is basically a way of being able to own cryptocurrencies without having to pay for them. In Bitcoin, and Altcoins such as Ether and Litecoin, this is done through Proof-of-Work (POW), a consensus algorithm which confirms transactions and produces new blocks on the chain. Miners compete against each other to verify transactions and then get rewarded in the form of blocks — at the moment this is 12.5 Bitcoins, although this is expected to be halved to 6.25 in 2020, or 2021.
It is a however a complicated, expensive, and time-consuming process, with no guarantee you’ll be successful. This makes it very questionable if Bitcoin mining is worth the investment for the average Joe, as it is a far cry from the logistics of mining in Bitcoin’s infancy. In the early days, it could be done on an average household PC, but it now requires very costly machines. So why has it become so costly and energy-consuming?
This is down to its popularity and evolution to mass use. As Bitcoin became more popular, mining became more competitive, and as a result, the mathematical puzzles to solve the transactions on the blockchain have become a lot more difficult. By 2010, an average computer, using a Central Processing Unit (CPU) wouldn’t hack it, and Graphics Processing Units (GPUs) were needed. This in later years evolved to Field Programmable Gate Arrays (FPGAs) and then Application-Specific Integrated Circuit (ASICs), and the mining machines are becoming more and more complex to this day. A report by the International Energy Agency (IREA)has put the annual total energy consumption of Bitcoin as being more than some countries, as demonstrated by this chart which shows where Bitcoin would lie in terms of energy consumption if it was a country.
As with other aspects of the currency, such estimates have led to some rather negative media coverage. A Guardian article in January 2019 proclaimed Bitcoin as being the “next big environmental fight” (after oil), and gives a caveat to Bitcoin miners that as the world moves away from oil and seeks cleaner energy, environmentalists will see Bitcoin mining as the next big enemy.
However, some media coverage sheds the energy consumption of Bitcoin mining in a different light. A report released by cryptocurrency investment products and research firm Coin Shares on June 5 claimed that nearly 75% of Bitcoin mining is actually powered by renewable energy — certainly a welcome development. The majority of the mining currently happens in China (although other countries are rapidly getting in on the act), and Sichuan province, with its abundant seasonal rainfall and hydro-electric plants, is fast becoming a focal point. Additionally, Antoine Le Calvez, a researcher for Coin Metrics, claimed in April 2019 that the energy consumption levels for Bitcoin mining throughout its 10 year existence is equal to the energy consumed by all the vehicles in the US for…3 days. When it is put like this, maybe the energy consumed for Bitcoin mining isn’t so significant after all, or isn’t such a problem?
Well…despite the welcome news in Bitcoin mining being powered by renewable energy, POW is the most energy intensive cryptocurrency mining consensus. To stand the best chance of solving the puzzle, miners look for equipment with the highest hashrate possible. The higher the hashrate, the faster a miner can solve a puzzle. The high costs and energy consumption levels are not seen as being prohibitive…yet, but there is a general acceptance that the current state of things isn’t sustainable.
A move to more efficient solutions
Improving efficiency is the key to lowering energy consumption and as a result, costs. To these ends, the Bitcoin network is in the early stages of implementing The Lightning Network, which is being hailed by some as the answer to Bitcoin’s scalability problems. This along with the move towards green mining is being seen by some as the future of Bitcoin.
Meanwhile, code for the Proof-of-Stake (POS) blockchain on the Ethereum network is set to be imminently finalized, with the expectation it will be mass adopted within the next year. Instead of competing for block rewards through the solving of mathematical problems, miners take turns based on their size of stake in the network. The Ethereum community plans to make this change because of the considerably less amounts of energy that this method uses in comparison to POW.
Green mining is the future
Ultimately, although it is impossible to get away from the fact that mining will always use considerable amounts of energy, the move towards green mining means that the cost towards to the environment will not be damaging. A report by the IREA published in 2018 claimed that renewable energy will be consistently cheaper to use than fossil fuels by 2020. This is significant because if and when this is realized, there will be no incentive for miners to use fossil fuels at all.
Coupled with the advancements in technology, the future is clearly green for Bitcoin and cryptocurrency mining. Investments will inevitably be made in more renewable energy — such as solar panels and hydroelectric plants — in addition to what is already being used. A shift to Cloud-based cryptocurrency mining is also well underway. This is when companies mass mine on the behalf of individuals. This is ultimately good for the environment because of the economies of scale it brings. In addition, as renewable energy comes more and more to the fore, the potential for low cost and green large-scale mines will only increase. For Bitcoin and other cryptocurrency miners then, a green future beckons!