Criticism over cryptocurrency's massive electricity consumption has been voiced for many years, but recently it got official approval: The White House released a report detailing the magnitude of digital token mining’s electricity requirements - and it is very concerning. The report said that cryptocurrency mining consumes as much power as all the data centers in the world, holding governments back from the ‘Net-Zero’ objective that they strive to achieve. How could this be? What does the crypto industry do to face this issue? Can something even be done to minimize these adverse effects?
According to Ofir Bar, a veteran investor with over two decades of experience in worldwide markets, solutions are existent, but not everyone is willing to utilize them quite yet. “Miners of some digital coins have already taken matters into their own hands and managed to substantially shrink their environmental footprint. Sadly, most are yet to implement eco-friendly ways of action,” he said. “The ‘Net-Zero’ objective is the responsibility of everyone, not just of governments alone. Cooperation is necessary to live up to it, which is in the best interest of all of us.”
Carbon pollution (Photo by Unsplash)
Massive energy consumption
First and foremost, it’s essential to understand what ‘crypto mining’ is. This term refers to the process of creating new digital tokens. The most common mining method is named ‘Proof of Work’, and it’s rather complex since it requires solving puzzles, validating cryptocurrency transactions, and locating them. All these actions require massive amounts of electricity: Nowadays, crypto mining requires approximately 1% of global electricity consumption, which means crypto miners have a substantial part in carbon emissions to the atmosphere.
Also, crypto mining is vastly affected by the mined coin value: If its value is on the rise, mining companies have a reason to invest more computing power to mine more coins. Therefore, the report by the White House warns the public about a possible overload on electricity networks when cryptos’ value is on the rise, as has already happened in Texas.
Bitcoin mining (Photo by Unsplash)
There are other ways around it
‘Proof of Work’, as implied, is not the only way to mine cryptocurrencies - there are other, more environment-friendly methods to do so. One of these is called ‘Proof of Stake’, where the right to mine coins is based on the number of coins that the miner is willing to risk by depositing them in the central system. A lottery is held among all participating miners. Those who put more coins at stake have a higher chance to win the lottery, which also saves the need for competition to solve a cryptographic puzzle.
This method of operation is nowadays common among miners of some cryptocurrencies, including Ethereum. Ethereum miners reported that their energy consumption diminished by more than 99% since they started using Proof of Stake. With that said, since this update, this coin’s value has drastically dropped. However, it’s too early to tell whether this happened due to the update.
Miners of Bitcoin (and many other major and minor cryptos) are still reluctant to adopt this method for a number of reasons: They claim that Proof of Stake is more vulnerable to fraud and that it prioritizes those who already have a lot of capital to play with. They claim to not be indifferent to the high energy consumption caused by Proof of Work, and that they are promoting renewable energy solutions to live up to the energy requirements of their way of operation.
Data servers (Photo by Unsplash)
Only a matter of willingness
It is unclear whether Bitcoin miners are anywhere close to finding or implementing a true solution to the high electricity consumption of Proof of Work, or if they even prioritize this goal. After all, there is more than one method to decrease mining energy consumption. For example, mining only in times when electricity is under-used.
“That’s an interesting and viable solution, and its implementation can be faster than many other methods. However, I don’t believe that Bitcoin miners are enthusiastic to implement it,” claimed Bar. “Cryptocurrency miners have to understand that everything one does has consequences on others, and they need to consider that before they mine currencies indiscriminately. ”