When Tesla CEO Elon Musk announced that the company would no longer accept bitcoin for purchases, the cryptocurrency market suffered a massive loss of hundreds of billions of dollars. Since then, crypto sceptics have frequently expressed concern about the severe environmental impact of Bitcoin Mining and crypto mining. Critics call it an energy guzzler, while supporters praise it for being less energy-intensive than the present global economy.
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But why do crypto and Bitcoin mining require so much energy?? How much electricity does bitcoin use on a global scale? The answer is critical not only for the health of the planet but also for the value of the currency.
Why are Bitcoin Mining and Crypto Mining energy-intensive and how much does it bother environmentalists?
Environmentalists are concerned about the amount of computer processing power required to mine cryptocurrencies.
The Bitcoin mining and crypto mining process needs:
- High-powered computers to validate transactions in exchange for coins.
- Huge quantities of electricity to power sophisticated algorithms in the mining process.
- Non-renewable and polluting fossil fuels like coal. This makes mining crypto an energy-intensive activity.
How do you decide how much energy is justified to be consumed by crypto?
Your response is likely to be impacted by how you perceive and see cryptocurrency. If you believe it has no significance other than as a Ponzi scheme or a way to launder money, it’s natural to believe that putting any effort into it is pointless. If you’re one of the millions around the world who use it to evade monetary repression, inflation, or capital controls around the world, you probably believe it’s money well spent.
While both environmentalists and Musk agree that bitcoin mining uses a large number of fossil fuels, other, more environmentally friendly cryptocurrencies are less harmful. These could help to alleviate some of the concerns about cryptocurrencies and the environment.
According to researchers, energy consumption may be reduced to 1/10,000th of what it is now. For example, Bitcoin mining uses 707 kWh of electricity, while Ethereum mining uses 62.56 kWh. Ethereum 2.0, on the other hand, is a very efficient cryptocurrency.
Future of crypto, the PoS way
Despite the high energy requirements of Proof-of-Work (PoW) blockchains, such as Bitcoin or Ethereum, newer consensus mechanisms such as Proof-of-Stake (PoS) are being developed and implemented. These bitcoins do not require mining. The impending switch from PoW to PoS on Ethereum is expected to reduce the network’s energy demand by around 99%.
In conclusion, all we can say is that we are not doomed. Even though PoW mining isn’t going away (for the time being), many blockchain participants are focused on decreasing energy use through novel ways. Thus developments in this nascent industry are quickly blooming. Though PoW mining is by no means the largest energy consumer, its high visibility draws attention to the power sector’s overall carbon intensity.
Blockchain technology is here to stay. It provides genuine and significant new ways of exchanging value securely and transparently. Moreover, the development seen in recent years has been remarkable. Proof-of-Stake (PoS) networks will be utilised in the future as it provides decentralisation and security while utilising a fraction of the energy consumed by Proof-of-Work (PoW) chains like Bitcoin’s. This will make crypto extremely energy-efficient.
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