Altcoins Talks - Cryptocurrency Forum
Learning & News => News related to Crypto => Topic started by: Vinn on June 09, 2022, 04:25:39 PM
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Cryptocurrency and blockchain have already made their way into the books of many small and big companies. They have evolved from being some form of dubious technologies to becoming the next-generation tech that are key to driving the next industrial revolution.
Both cryptos and blockchains offer promising use cases to finance, supply chain, internet security, cloud storage, and a number of other sectors.
But when we discuss any technology for the future, sustainability is a crucial factor. We are at the tipping point of environmental damage and a technology that threatens the remaining balance in our ecosystem can prove devastating in the long run.
As is the case with most cryptocurrencies and fiat currencies today, they do not fit the mold of a sustainable future solution for money. While fiat currencies are a threat because they are paper-based, cryptocurrencies may have lethal consequences for our environment due to their extensive energy consumption.
The Bitcoin network alone consumes almost 0.21% of the world’s total energy supply, which is equivalent to 57.3 terawatt-hours. To put that into perspective, this equals the annual energy consumption of Switzerland. Ethereum network, on the other hand, consumes more than 7.8 terawatt-hours of electricity, which makes Ether the second most energy-intensive blockchain network and cryptocurrency. Recently, Bill Gates also raised concern on climate change and its effect on the environment in his Blog he says “To understand the kind of damage that climate change will inflict, look at COVID-19 and spread the pain out over a much longer period.”
So, why do most cryptocurrencies consume such huge amounts of energy? The answer lies in the underlying consensus protocol.
Proof-of-Work
Proof-of-Work or PoW is an algorithm that a decentralized network uses to settle transactions on a blockchain network. Cryptocurrencies such as Bitcoin and Ether employ the PoW consensus algorithm to create new coins and also distribute the coins across the network.
In the PoW algorithm, blockchain nodes called miners from across the world use high-end computing hardware to solve cryptographic puzzles to approve transactions and mine new coins. Each blockchain node competes against all other nodes to be the first to generate the hash that is the solution for the puzzle. As they solve the puzzle and approve transactions, they mine a new block on the network and also create new crypto coins. The winning node gets to claim the new coin that mined on the network.
Earlier, it was possible to mine Bitcoin using the RAM of a personal computer. With time, however, the mining difficulty on the Bitcoin network has increased multifold. Today, we have application-specific integrated circuit (ASIC) devices developed for the sole purpose of mining Bitcoin and other PoW-based cryptocurrencies. Each of these devices can have an environmental cost of up to $1,500 per year. (Source)
It is expected the energy demand of these PoW networks will keep growing as the networks grow in size and more blocks and transactions are added to them.
Read more in detail: xdc.dev/vinn_v_9686/the-environmental-impact-cryptocurrency-mining-vs-xdpos-consensus-535p
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Of course, the problem of consuming a large amount of energy when mining cryptocurrencies that use the PoW algorithm exists and it is increasingly being raised by politicians and economists from different countries, especially against the backdrop of the obvious dramatic climate change on our planet. In this regard, bitcoin may indeed have problems, but I think that it is no longer necessary to attribute erhereum to this group. The network of this coin will switch to the PoS algorithm in the coming months as part of its major update that has been going on for almost two years and therefore will no longer be energy-intensive.
But in general, states may well take prohibitive measures against a group of cryptocurrencies using PoW.
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The attitude of states towards a cryptocurrency that uses the PoW algorithm will depend on how humanity can solve problems with the ever-increasing problem of energy use and the fight against global climate change. If the problem of energy shortage can still be solved thanks to constantly developing technologies for the use of alternative energy sources, then the problem with global climate change will only get worse. And this means that states will eventually take the most stringent measures against cryptocurrencies that use PoW, up to and including their prohibition. Therefore, bitcoin may suffer in the future.
Ethereum has already solved this problem by switching to the PoS algorithm.