Founder & CEO at Kick Ecosystem. Crowdfunding & Blockchain evangelist since 2009
The mining process is vital to blockchain networks like Bitcoin, as they validate incoming transactions before storing them forever. This, of course, is done by miners, who provide their computing power to find complex, 64 character hexadecimal numbers to ensure each block is unique.
However, this “Proof-of-Work” validation method takes vast amounts of computer power, which costs the miner a hefty fee and arguably takes a big toll on the environment.
According to New Scientist, Bitcoin miners across the world put out nearly the same amount of carbon emissions as the entire country of Estonia, with Chinese miners contributing the most at 47%. That and the Cambridge Bitcoin Electricity Consumption Index (CBECI) discovered that Bitcoin’s power consumption was higher than Switzerland’s as of this July.
These findings prove beyond doubt that Bitcoin mining, as essential as it is to the inner-workings of the network, has a significant impact on the environment. But how severe is it, really?
As of now, mining is done by harnessing the power of a GPU such as an Nvidia graphics card and utilizing it to its maximum limits. This includes overclocking the device and pushing temperatures in ways it wasn’t designed for, leading to high failure rates and frequent replacements.
This pulls in large amounts of electricity, both for the cards and facilities needed to cool and power them, leading to excessive amounts of carbon emissions.
Since Bitcoin broke into the mainstream in 2017, there have been many studies and discussions surrounding whether or not the electricity pull from mining is significant enough to contribute towards climate change and other environmental dangers. At that time, one study even predicted that Bitcoin would output energy equal to that of the entire world come 2020. And remember, there are still tons of other Proof-of-Work cryptocurrencies that aren’t even being factored in here.
Almost three years later, we’ve learned a lot more about Bitcoin and while its emissions are not something we can ignore, it turns out that a lot of these earlier claims were a bit bold. Bitcoin will not be the thing that turns Earth into a frozen wasteland.
But, it can be something that creates enough impact to push past the 2 °C emission limits agreed upon by countries in the Paris Agreement.
A study conducted via Nature.com notes that if Bitcoin were to “follow the rate of adoption of other broadly adopted technologies, [it] could alone produce enough CO2 emissions to push warming above 2 °C within less than three decades.”
But, this is a worst case scenario, and of course workarounds are in development each and every day.
Should Bitcoin mining continue to grow, governments would likely implement some sort of regulation to prevent exceeding these rates, as China has been considering doing for some time now. These could come in the form of limiting what type of hardware is used to mine, and place fines on businesses and households that exceed a certain threshold of power usage.
However, China is also known for its cheaper electricity rates. Limiting mining here would cut off many who would either have to relocate or change industries.
Then, as Bitcoin’s price increases, we’re likely to see one of two things happen:
1. We’re going to see miners put even more effort into mining and earn their respective rewards, increasing their electricity output and contributing more to emission rates.
2. The increased mining difficulty will put off these same miners. Less people will contribute to the network, lowering the emission rates put out by mining Bitcoin.
However, as technology advances, we’re likely to see more efficient ways of mining as well. Remember those high rates mentioned above? It turns out that much of that power is generated via renewable energy that can compete with hydro-electric power. Bitcoin’s community could also vote in more energy-efficient validation methods, such as including more transactions per block, to achieve the same effect.
What already exists is something called an Application Specific Integrated Circuit (ASIC) - essentially a graphics card designed specifically for mining. Not only are these cards faster than a traditional GPU when it comes to mining, but they’re also much more energy efficient. Some even argue that ASICs are the only way to profitably mine Bitcoin at all nowadays.
There’s also the fact that, while we know Bitcoin mining isn’t as environmentally harmful as once thought, we don’t have all of the information available. One Camilo Mora from the University of Hawaii states that despite knowing the amount of these emissions, there’s no saying where it is all coming from due to decentralization.
If, somehow, we were able to pinpoint all of the different places where mining farms and other areas heavy into mining are, we could examine what hardware they’re using and potentially improve the process even more.
While most of this talk has been around Bitcoin, other cryptocurrencies contribute to the problem as well. Ethereum, the second cryptocurrency in terms of market cap, is another Proof-of-Work project that has thousands of miners.
However, in an eventual update, the Ethereum community is looking to transition to a much healthier consensus system: Proof-of-Stake.
Proof-of-Stake eliminates the need for mining entirely. Instead of miners, it relies on a process called “staking”. Stakers are those who hold amounts of an asset in their respective wallet. The more they hold, the more “stake” they have in the network.
Stakers with the highest amounts held are chosen to forge a block, as they’re trusted enough to do so. Of course, they’re rewarded for this effort just like a miner would be.
As you may have concluded, this is much better for the environment considering there’s no need for hash power or ASICs to solve complex algorithms. All that’s necessary is a currency and a wallet. Proof-of-Stake also has the benefit of allowing anyone to participate in the network, rather than only those with the most GPUs.
Users with more stake obviously have more power, and that can possibly get out of hand. Also, Proof-of-Stake participation requires an always-on connection, which not everyone has. But, it’s much better than Proof-of-Work when it comes to emissions and electricity use.
Mining and its environmental issues are definitely a case of growing pains when it comes to Bitcoin and other Proof-of-Work cryptocurrencies. While it wasn’t so much of a problem back when the asset was unknown, mining has certainly grown into something that needs a widespread solution.
Simply asking all Proof-of-Work blockchain projects to convert to Proof-of-Stake might be unrealistic. Instead, it appears that the solution must come from how these miners harness electricity, be it through cleaner electricity methods, more efficient GPUs, or another avenue.