Concerns regarding the carbon footprint of the cryptocurrency mining industry continue to grow after it came to light that the power required to run the Bitcoin network exceeded that power consumption of entire countries.
However, in an exciting turn of events, the World Economic Forum is now postulating that cryptocurrency mining could become the new face of efficient energy use and reduced energy wastage.
How Energy Intensive is Mining?
Mining is the process by which people validate the transactions on a proof-of-work (PoW) cryptocurrency network and as a result, add new blocks to the blockchain.
Proof-of-work is the brainchild of Bitcoin’s pseudonymous creator(s) Satoshi Nakamoto. When he created the world’s first decentralized digital currency, proof-of-work was an efficient and effective way to keep the Bitcoin network secure.
Considering the energy costs and all other factors, proof-of-work was determined to be the best method for his invention. Many other developers agreed as PoW was used by many other cryptocurrencies that followed.
However, as more people began to participate as miners and more energy was required to validate transactions, concerns regarding the cryptocurrency sector and the effects of mining began to grow. Additionally, global sentiments about the effects that human actions were having on the environment were also reaching a fever pitch. Many countries were debating and enacting legislation designed to preserve the environment and reduce the effects of industry on it.
Partly as a response to these concerns, developers within the cryptocurrency community began to experiment with new consensus methods which place fewer demands on the environment regarding energy consumption. Consensus algorithms, such as Proof-of-Stake (PoS), were developed and began to increase in popularity due to their more energy efficient aspects.
While the cryptocurrency sector is making strides to keep up with the rest of the world’s industries in their attempts to be more energy efficient, the large and unsustainable rate of consumption of energy is still a significant cause for concern.
As recently as December 2017, there were reports that energy consumption figures for bitcoin mining were still on the higher side. Estimates postulated that bitcoin mining consumed more energy than some of the worlds smaller countries.
Energy Efficiency and the Crypto Community
The efforts being undertaken by the crypto community go beyond the development of less energy-intensive consensus mechanisms. Corporations and individual actors alike are harnessing the power of blockchain technology to bring about a new age in the energy sector.
While it is undeniable that keeping the networks of digital currencies secure through the mining process is an energy-intensive process, the energy sector itself is mired in a myriad of inefficient practices, bureaucracy as well as malpractices that leads to widespread waste of resources.
For many countries and jurisdiction, the energy distribution is the preserve of centralized bodies, most of which are government-mandated. In many industries, centralization lends itself to unfair practices, and it is no different in the energy sector. The prices of electricity are often disproportionately high because of the monopoly that the authority has within that sector.
Additionally, when there is leftover energy, the energy is not put to any use due to a combination of lack of goodwill from the bodies as well the expensive nature of storing excess energy.
Some blockchain-powered applications for the energy sector are being deployed across the world. These address the energy sector from some different angles. For instance, some projects are working on incentivizing individuals to harness solar and wind sources to create energy and then sell it to their peers at fair rates. There are also solar-powered cars connected to the electricity grid which can replenish the grid with their excess energy.
In these instances, it is evident that blockchain technology is helping to usher in a more energy efficient planet. However, according to the World Economic Forum, the cryptocurrency mining sector will soon be able to claim the energy-efficient status that the blockchain currently holds.
Cryptocurrency Mining the New Face of Energy Efficiency?
Cryptocurrency mining can provide an economically feasible mechanism through which excess energy can be put to good use. This is the crux of the argument set forth by the WEF.
Storing excess energy is generally an expensive affair that usually does not result in monetary gains for the actors involved. Also, as the world moves towards more sustainable sources of energy such as solar or wind sources, there are enormous amounts of excess energy. While solar and wind energy farms can sell the excess energy back to the grid at a wholesale price and minimize waste in this manner, they still face challenges when it comes to storing the energy.
These plants can store some of the excess energy, but there is still a significant amount of energy wasted. In China, for example, the wind plant wasted over 12 percent of the total energy produced in 2017. Thus it is essential to find economically sound mechanisms to use the leftover energy, or the sustainable energy sector is fighting a losing battle.
Putting the excess electricity found in energy grinds as well as that from sustainable sources plants to cryptocurrency mining provides another way to put this energy to good use in a way that includes profit for the stakeholders involved. The energy merchants can garner a profit from the sale of their product while the miners are still able to participate in their networks and receive a financial reward for that.
Recent research has shown that that mining bitcoin uses less energy than banks. The problem with bitcoin mining is not necessarily the amount of energy consumed, rather the source of energy used by the miners. If this is indeed an accurate representation of the problem statement, then the crypto mining sector is ready to shed its energy-inefficient image.
The use of excess energy for cryptocurrency mining is not just limited to large plants with significant amounts of electricity to put towards it. It is also possible for single individuals to participate in this endeavor by using their excess energy to mine digital currencies. This will provide a cheaper source of energy which then leads to higher profits from the mining exercise.
BTCManager spoke with Dr. Hans Joachin Dürr, Head of Corporate Communication at the publicly-traded bitcoin mining company, Northern Bitcoin, about the use of renewable energy in cryptocurrency mining.
BTCManager asked Dr. Dürr whether he believes that the future of cryptocurrency mining will involve renewable energy sources due to the substantial amount of energy that it requires.
“Due to Bitcoin’s high energy requirements, we are fully convinced that only renewable energy can point the way to its remaining the largest and most important cryptocurrency. That’s why we mine Bitcoin in Norway solely by hydropower and why we are promoting sustainable, climate-neutral mining, even among the miners who join our mining pool. It would be absurd to burden the environment with emissions from burning fossil fuels in times of global warming to enable even the technological revolution of the Bitcoin blockchain,” he responded.
BTCManager also inquired with Dr. Dürr about the idea put forward by the WEF article, which suggests that encouraging users of renewable energy sources to utilize their excess energy for cryptocurrency mining – incentivized by financial gains – could result in higher use of renewable energy usage by private individuals globally.
Dr. Dürr responded:
“From our point of view, it is going to be best practice to use excess energy from renewable energy sources, that would otherwise be unusable for a variety of reasons, for Bitcoin mining. There are many good arguments for Bitcoin miners using these resources. Firstly, it is usually not a problem to locate the mining hardware in close proximity to the power generator, which also happens to be very effective since line losses are minimized.”
“On the other hand, the energy requirements of mining can be optimally adapted to the available resources by the number of miners installed. Interestingly, mining hardware can very well cope with the peculiarities of renewable energy (wind, solar) regarding the security of supply. In case of any power interruption, no data is lost.” he added.
If cryptocurrency mining moves toward to use of renewable energy sources and, moreover, encourages the use of excess energy, cryptocurrency mining could become an entirely environmentally-friendly endeavor while providing a service to society in the form of secure decentralized digital currency networks.