Cryptocurrency mining is a modern digital asset-creating technique. Only, here you will be creating bitcoins instead of real currency. From their inception in 2009, cryptocurrencies like Bitcoin, Ether, etc have seen massive growth in price and popularity. Since then, more and more people have joined the crypto bandwagon to make it big for themselves.
Off late, cryptocurrencies have gained so much acclaim that Tesla CEO Elon Musk recently announced accepting bitcoins for his Teslas. But later, he suspended vehicle purchases via bitcoins claiming concerns about environmental impacts due to mining. Several environmentalists are equally concerned about the hazardous effect bitcoin mining is having on the environment. Around 75% of cryptocurrency mining happens in China, and a study depicted that by 2024 the country will generate a whopping 130.50 million metric tons of carbon emission.
To understand why mining consumes so much energy, we must first understand the process of cryptocurrency mining.
What is Cryptocurrency Mining
It is a process of solving complex cryptographic math problems using high-powered computers to create new bitcoins and update the ledger of bitcoin transactions, also called the blockchain. The miner first to solve the math problem updates the ledger. In return, they receive newly mined bitcoins as a reward. Mining works on a concept called “proof of work”. It is a process of validating the computational efforts of a party in a decentralized system by other miners to produce new tokens.
Energy Required for Mining Cryptocurrencies
The mining process consumes an enormous amount of electricity. To solve the tough mathematical puzzles, high-end computers have to continuously work on the calculations to generate the correct results. It is estimated that close to 121 Terawatt-hour of electricity is consumed every year in this process. With the mathematical problems getting tougher by the day, the network will continue consuming more computing power and energy for the transactions.
Countries like China, which produce cheaper electricity using fossil fuel and burning coal, are major contributors to mining bitcoins. Burning coal to fuel the mining process is generating threatening levels of carbon dioxide into the atmosphere.
Apart from increased carbon emissions, cryptocurrency mining also results in excess e-waste. Electronic waste is produced when hardware becomes obsolete, and the miners let go of them.
The Alternative
One solution to reducing carbon footprint via mining is to use more renewable resources than coal or fossil fuels. Organizations like World Economic Forum, Energy Web Foundation, Rocky Mountain Institute are joining hands to enable blockchains to be powered by 100% renewable energy resources. To decarbonize blockchains, organizations are also contemplating using XRP Ledger which helps to significantly reduce emissions.
Another alternative is to use the “proof of stake” instead of proof of work as there is no mining involved in the former process.
Tech industry leaders and climate advocates should unite to decode a sustainable and greener path for the future of digital finance.
