Bitcoin mining uses as much energy as mining for gold, study finds
What does it mean for the future of the cryptocurrency movement and its impact on the environment?
- New study reveals that mining crypto can be use more energy than mine for gold.
- In order to understand the findings, we must first understand what crypto mining is.
- The crypto community is looking for a way to solve these issue.
According to a study published in the journal Nature Sustainability on November 5, from researchers Max J. Krause and Thabet Tolaymat, it appears that mining cryptocurrencies — such as Bitcoin — uses more energy than conventional mining for copper and platinum. It may even use as much much energy — possibly more — than is used for mining gold. For some in the tech and environmental sectors, this isn't new information. In fact, since Bitcoin's inception, environmentalists and tech enthusiasts alike have brought attention to the energy-intensive process of mining the popular cryptocurrency.
Because of the new study, we now know, though, that the amount of energy required to mine Bitcoin is nearly twice as much as what's required for mining copper and platinum. But why is it so energy expensive and what does this mean for the future and sustainability of the cryptocurrency movement?
What’s causing the energy consumption?
To better understand the study's findings, it's important to first have a basic understanding of what Bitcoin and other cryptocurrency "miners" are doing. Bitcoin is just one type of cryptocurrency, well-known as the original currency with the highest market capitalization, but it's not the only currency in circulation. Along with many other coins and tokens, Bitcoins are digital currency that can be owned by anyone, transferred from one party to another, which are not issued by a central authority like the US dollar or other fiat currency.
The underlying technology powering Bitcoin and many other cryptocurrencies (though not all) is blockchain technology. The Bitcoin network relies on a decentralized network with a distributed ledger to keep track of all transactions. As people send and receive Bitcoins to each other, the network records the transactions. All of the recording is done by a large group of volunteers who maintain the network; these "volunteers" are the miners.
Those "mining" for Bitcoin aren't physically mining, but rather solving difficult cryptographic puzzles proving they've recorded the correct transactions and are in agreement with the network before adding a block (a chunk of information, i.e. set of transactions) to the history of transactions in the past (i.e. the "chain") — that's how we end up with a "blockchain." This is also how new Bitcoins are generated.
To accomplish this task, the Bitcoin network operates using a consensus mechanism called "Proof-of-Work" (PoW). This requires miners to do an extensive amount of processing and involves a lot of hardware running 24/7/365 in large amounts. If you've ever seen a cryptocurrency mining operation before, you'll know exactly what we mean.
Understanding the scale
The second factor to consider besides the actual mechanics of what's happening when mining is the size of operations. While there are miners operating small rigs in their college dorm rooms, there are an even larger number of exceptionally large mining operations taking place across the world. Given how energy intensive mining for cryptocurrencies is, energy consumption is only compounded when looking at the global scale of mining.
In fact, some estimates have put the global energy consumption of Bitcoin mining higher than energy consumed by all of Ireland. While others believe such estimates to be inflated, the fact remains that mining cryptocurrencies requires a substantial amount of energy, especially after factoring in mining operations from other cryptocurrencies besides Bitcoin, like the second highest coin by market capitalization, Ether.
What is the community doing to solve this?
Of course, those on the sidelines aren't the only ones noticing the vast amount of energy consumed by mining cryptocurrencies. Improving efficiency in the cryptocurrency world is already a concern for many of the top minds in the industry.
The founder of the Ethereum project, Vitalik Buterin, has already proposed a new direction for the well-known blockchain-based platform that's given rise to so many new tokens in recent years. Though currently operating on a Proof-of-Work (PoW) consensus mechanism like Bitcoin, the Ethereum network is slated to eventually make the switch to a new Proof-of-Stake (PoS) hybrid method of mining that will reduce energy consumption in the crypto mining industry while still maintaining the integrity of the network. The new initiative has been nicknamed "Casper" and is to be implemented with sharding for a new version of Ethereum known as "Serenity," according to Buterin.
At the same time, there are others in the community looking at different solutions. Some sources aren't looking at the energy consumption itself, but rather how miners are getting the energy they require. New initiatives are popping up in the market to offer green energy solutions directly to the mining community with a heavy thirst for energy.
While others, like Timothy Lee with ArsTechnica have pointed out that if the price of Bitcoin stays (relatively) consistent, then we're likely to see energy demands from the network decrease over time, not increase, as block rewards (the amount of Bitcoins miners receive) decrease over time. The next "halving" is expected to occur in mid-2020 with the reward dropping by 50% roughly every four years following that until the last of the 21,000,000 Bitcoins are completely mined.
Others in the industry dislike the comparison between gold and cryptomining altogether. As CEO and co-founder of cryptopotato.com says:
I think that this kind of comparison is too shallow; it doesn't take into consideration two factors which are much more important than the amount of energy consumed. Bitcoin mining farms will always try to reduce their energy price and their consumption as much as they can while trying to find renewable energy resources so as to make processes cheaper and more efficient. In the case of gold mining, however, electricity is just one of many resources in a process which has a lot of constraints which result in nonrenewable resources being used such as coal and oil which have far reaching environmental repercussions.
Even with the significant energy consumption by cryptocurrency miners, the researcher behind the study, Max Krause, still believes cryptocurrencies will continue to grow in popularity and relevance in society, saying that:
I believe in the next five years you'll have the option to buy something on Amazon or a coffee at your local shop with cryptocurrency. But what I want is for people to understand all the costs of the new technology. We can embrace new technology but we should have a good understanding of what exactly we are embracing.
The question now remains how energy consumption concerns will impact the growth and direction of the cryptocurrency world in the coming future. What do you think?
The private sector may need the Outer Space Treaty to be updated before it can make any claims to celestial bodies or their resources.