Two Sides of the Coin
June 23, 2018, 10:41 am
Bitcoin trading per day is using 0.17% of the worlds daily electricity consumption, according to an index by Digiconomist. With Bitcoin prices the way they are currently, it would be profitable for Bitcoin miners to burn around 24 terawatt-hours of electricity annually as they compete to mine more Bitcoins, according to Digiconomist. That electricity consumption is almost equal to the entire energy consumption of Nigeria annually, a country of 186 million people.
Currently there are around 1.8 million cryptocurrency transactions daily, 450,000 of those are Bitcoin. Bitcoin’s estimated annual power consumption is 31.6 TWh, that’s more power than Ireland uses annually. The electricity consumed for a single transaction is 251 kWh, which is sufficient to power 8.49 typical households in the US for a day. The Index also shows that Bitcoin miners worldwide could be using enough electricity to power about three million American homes. Triple that figure, and that is close to the amount of electricity used annually for cryptocurrency mining and trading. Enough to power over nine million homes.
Research by Sebastiaan Deetman, Researcher Resource Efficiency at Leiden University, shows that if the Bitcoin network keeps expanding at the current rate, it could lead to a continuous electricity consumption that lies between the output of a small power plant and the total consumption of a small country such as Denmark by 2020.
Research such as this is not isolated, and all conclusions are the same; the environmental footprint of cryptocurrencies is a grave concern and we need to ask ourselves tough questions about what these findings mean for our environment and how to mitigate the impact.
On the one hand, you have the ability of cryptocurrencies to support climate change and sustainability, and on the other you have the massive energy usage issues associated with cryptocurrencies. Several cryptocurrencies are addressing this.
Vienna-based HydroMiner, for example, uses renewable hydroelectric power for its bitcoin operations. HydroMiner believes it’s crucial that as much of the energy consumed by its cryptocurrency trading comes from an ecologically friendly resource. Its goal is to have the industry’s lowest carbon footprint.
Hydro power is generally thought to be one of the most effective and lowest-cost renewable energy resources, according to HydroMiner. It is environmentally friendly, carbon-neutral and natural. Hydro power allows HydroMiner to manage its resources sustainably and enables low-emission production. Using hydro power stations in the Alps region, HydroMiner reaches one of the lowest prices per kilo Watt in Europe. According to HydroMiner’s website, its cost of electricity is currently 85% lower than the average in Europe. The cryptocurrency company finds further cost savings by using the water for cooling its mining equipment.
CarbonCoin is another example of a cryptocurrency that aims to reduce not only its carbon footprint, but mitigate environmental impact overall. CarbonCoin has eliminated mining for profit – the aspect of cryptocurrencies responsible for harming the environment, through wastage of electricity.
The CarbonCoin Trust’s CarbonCoin was started by a developer who had grown frustrated with the amount of electricity being unnecessarily wasted in the coin mining process of Bitcoin.
CarbonCoin aims to stop energy being wasted on the mining process without jeopardising the security of the network, and is also looking at what can be done to rectify the damage already done to the environment.
To mitigate energy waste by cryptocurrency mining, CarbonCoin plants biodiverse forest on land not being used for anything else. CarbonCoin is designed not just to generate wealth for everyone who uses it, but also to fund the planting of millions of trees worldwide to address the problem of soaring emissions. CarbonCoin works independently of any bank, central or otherwise. It also operates fully automatically, without the need for human administration.
However, according to CNN Money, the solution to this massive electricity usage is not as simple as investing in renewable energy facilities along with bitcoin mining equipment, as this would only increase risk and make any potential return of investment for the operation take longer.
A new cryptocurrency due to launch at end 2018 may be the solution to this problem. The media is hailing Chia, a cryptocurrency developed by BitTorrent creator, Bram Cohen, as the world’s first environmentally friendly cryptocurrency. The Chia website states that it is “building a blockchain based on proofs of space and time to make a cryptocurrency which is less wasteful, more decentralised, and more secure”.
According to Cohen, when it comes to Chia, they will use the term farming instead of mining, as it’s a more environmentally friendly process. This system requires significantly fewer energy resources. Bitcoin mining is a complex process which requires vast amounts of processing power to solve its algorithms and accommodate its hashing operations. To solve the growing problem, Chia network created a new token which operates in an entirely different way using proof of space.
Chia farming does not require ASICS or any other specialised hardware. Technically it can be done on a normal computer. Chia utilises unused storage space on a device that is not even monitored by the internal file storage system. Seeing as the rewards are proportional, a farmer will receive rewards that are the equivalent of the amount of work they put in.
Chia is set to launch towards the end of 2018. Upon launching, Chia will incorporate Lightning Network Channels for faster transactions. The team also intends to bring about other tweak and changes that they believe will make the cryptocurrency the better and more environmentally friendly Bitcoin.
Cohen’s goal is to make a better Bitcoin, fix centralisation problems, reduce environmental impact and remove the instability that can happen when miners have an excessive amount of influence on mining operations from cheap electricity and massive mining operations.
Looking to the future, investors need to not only look at the direct impact of their investment on the environment, but also how the process of creating and trading that investment affects the environment for their money to truly be making an impact on the world.