How We Can Solve the Cryptocurrency Energy Usage Problem

Original Source: https://www.sitepoint.com/cryptocurrencies-energy-usage-problems-solutions/?utm_source=rss

Bitcoin is still the most important cryptocurrency people know about, and it serves as the entry point of the crypto space. However, every innovative project has to pay its price. For Bitcoin, it is its high carbon footprint created by mining.

Bitcoin mining works by solving cryptographic puzzles, also referred to Proof of Work (PoW). The miner that’s first to find the solution receives a Bitcoin reward. However, this race towards finding the solution comes with high energy usage, as it’s a resource-intensive process requiring a lot of electricity.

Currently, Bitcoin mining uses 58.93 TWh per year. An online tool by the University of Cambridge showed that Bitcoin uses as much energy as the whole of Switzerland. More important is the carbon footprint of Bitcoin. The electricity generated for powering the Bitcoin network equals 22 megatons of CO2 on a yearly basis. You can compare this carbon footprint with the footprint of a city like Kansas City (US).

This article will cover the following topics:

how the amount of energy consumed by each blockchain project differs depending on the implemented consensus algorithm
possible solutions for the high energy usage of Bitcoin
the effect of the Bitcoin network using a lot of excess and green energy.

To get started, let’s discuss if Bitcoin’s energy usage really is a problem?

Are We Thinking the Wrong Way about Bitcoin’s Energy Usage?

Let’s take a moment to think about where the energy for Bitcoin mining comes from. It’s worth questioning if the electricity the Bitcoin nodes use does harm the environment?

Many countries have an excess of electricity, especially when it comes to green energy solutions. The energy coming from green solutions like wind farms or solar plants is often hard to store or sell when the supply outweighs demand. This is true for many countries, especially China, which is responsible for 70 percent of the world’s Bitcoin mining.

As Bitcoin mining requires a lot of energy, node operators look for countries with cheap electricity prices. Reuters reported that “wasted [Chinese] wind power amounted to around 12 percent of total generation in 2017”. This means that node operators often end up in countries with an excess of energy. In those countries, Bitcoin mining plays an important role in neutralizing the energy market. Besides that, without Bitcoin mining, this excess of electricity is otherwise wasted.

Is it safe to say that Bitcoin does not contribute to environmental CO2 production? No, it does contribute for sure. However, the energy usage and CO2 pollution we think Bitcoin is responsible for is actually much lower.

Think about making a credit card payment. Every time you pull out your credit card to make a transaction, you also contribute to environmental pollution. You are not aware of the gigantic server plants of up to 100,000 square-feet to store and process all your transactions. Not to mention other things like their offices, payment terminals, or bank vaults.

It’s easy to attack Bitcoin for its energy usage. Therefore, it’s important to know that there is also an enormous hidden energy usage behind the VISA network. On the other side, the Bitcoin network only processes 100 million transactions per year, whereas the financial industry reaches up to 500 billion transactions per year.

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