Cryptocurrencies have taken a significant step since their humble beginnings. Whilst the conventional financial industry used to dismiss cryptos as instruments for crooks and gamblers, the sector has made great strides in proving itself as an open and (possibly) world-changing arena.
Bitcoin (BTC) and ether (ETH) have experienced enormous price and user growth, although there are still concerns about the long-term implications of widespread cryptocurrency use. Many skeptics and environmentalists have expressed worry about cryptocurrency mining’s high energy usage, resulting in increased greenhouse gas emissions and global warming. Head over to immediate profit to know more about cryptocurrencies.
Why Does Mining Necessitate The Use Of Energy?
The competitive nature of proof-of-work blockchains is to blame for these exorbitant energy expenditures. Rather than maintaining account balances in a central database, bitcoin transactions get tracked by a distributed network of miners who get compensated for their efforts through block rewards. These specialized computers are racing to generate new blocks, which they must do by resolving encryption riddles.
Because it does not rely on a trusted mediator or a single point of failure, cryptocurrency supporters think it offers several benefits over centralized currencies. Mining puzzles, on the other hand, necessitates numerous energy-intensive computations.
According to the BBC, in 2021, Bitcoin, the most well-known cryptocurrency network, consumes 121 Terawatt-hours of power a year, which is more than the whole country of Argentina. The Ethereum network consumes as much energy as the entire country of Qatar, according to Digiconomist, a cryptocurrency monitoring site.
One big worrying sign among activists is that when the bitcoin price rises, mining becomes less efficient. The mathematical problems used to produce blocks in bitcoin become increasingly complex as the price rises, while transaction throughput remains constant. To manage duplicate transactions over time, the network will demand additional processing power and energy.
Fossil Fuels and Virtual Money
All of this has combined to create a connection between cryptocurrency and fossil fuels that many investors have yet to see. According to University of Cambridge academics, about 65 percent of bitcoin mining takes place in China, a country where coal gets used to generate the majority of its power.
Coal and other fuels are presently a key source of power for bitcoin mining and other businesses worldwide. Yet, because of the carbon dioxide in the atmosphere by combustion, burning coal is a substantial contribution to climate change. According to a CNBC report, bitcoin mining emits around 35.95 million tonnes of carbon dioxide per year—roughly the same quantity as New Zealand.
Other Cryptocurrency Mining Environmental Consequences
Cryptocurrency mining consumes a lot of energy and creates a lot of electronic trash as technology becomes outdated. This is especially true for Application-Specific Integrated Circuits, or ASICs, specialized hardware used to mine the most popular cryptocurrencies.
These circuits, unlike other computer hardware, cannot be used and thus soon become outdated. Every year, the bitcoin network creates between eight and twelve thousand tonnes of electronic trash, according to Digiconomist.
Cryptocurrencies Without a Mining Requirement
It’s also worth mentioning that a significant percentage of cryptocurrencies have minimal impact on the environment. Proof-of-stake blockchains, such as EOS and Cardano, do not require mining, allowing transactions to get completed with the same amount of energy as a traditional computer network.
Even though this technique has significant benefits over mining, switching to a new consensus method is challenging for an established network. Ethereum is slated to transition to a proof-of-stake blockchain, but miners are opposed to the move.
Conclusion
Whether you support cryptocurrencies or not, there’s no denying that bitcoin and other proof-of-work blockchains use a significant lot of energy. Although bitcoin proponents have claimed that renewable energy sources are also a key component, much of this energy is generated by burning coal and other fossil fuels. While precise estimates are contested, even the most optimistic scenarios show that mining contributes to carbon emissions.