Planet Earth has never brighter. At least from space where the planet has more places brightly lit, thanks to electricity that goes to more remote places. But that follows some dark situations to blanket this world.
Humans have become ever more reliant on electricity for almost everything. And that includes communication and transacting. The economy works entirely on electricity, or at least for cryptocurrencies.
Bitcoin is the cryptocurrency introduced by Satoshi Nakamoto back in 2009, and since its inception, its trust-minimizing consensus has been enabled by its proof-of-work algorithm.
The blocks, the information, and the data that go inside the blockchain technology, are managed by machines performing the “work”.
And these machines are consuming huge amounts of energy while doing their work.
Back in the days when Bitcoin was young, one BTC was worth almost nothing, that a man even purchased 2 pizzas for 10,000 Bitcoins. At that time, an ordinary PC was enough for mining. But since the cryptocurrency has become increasingly popular with more users and more transactions made using it, the price increased tremendously, and the energy it is using is also increasing.
No longer a PC is enough, as mining needs dedicated hardware that hunger for electricity.
Miners Doing The Work
Cryptocurrencies, including Bitcoin, involves a process called "mining".
This work is painstaking and costly. Nonetheless, mining has a magnetic appeal for many investors interested in cryptocurrencies because of the fact that miners are rewarded for their work with cryptocurrency tokens.
While people can certainly buy cryptocurrencies from the market, trade it on exchanges, earn it on games or other online services (also called 'Bitcoin faucets'), it's the thrill of being involved in the economy that makes "mining" so appealing.
Besides that, the incentive that motivates people to assist in the primary purpose of mining, include the support, the ability to legitimize and to monitor the Bitcoin network and its blockchain.
Miners validate new sets of transactions, or also called blocks, by adding them into the Bitcoin's blockchain. While working on the blockchain these miners aren’t required to trust each other. The only thing miners have to trust is the code that runs Bitcoin.
The method to get the miners to agree on the same history of transaction, is to make them constantly tasked with preparing the next batch of transactions.
And this is where the competition comes. only one of these blocks will be randomly selected to become the latest block on the chain.
Since random selection in a distributed network isn’t easy, a proof-of-work is needed. The network adjusts the protocol to ensure that all miners in the network can only produce one valid block every 10 minutes in average. After the lucky miner gets rewarded with a fixed amount of tokens, along with the transaction fees belonging to the processed transactions in the new block, the cycle then starts again.
This process takes time, and a lot of electricity.
Hungry And Dirty
As mining can provide a solid stream of revenue, a lot of people are willing to become miners.
Like previously said, since the network needs an increasing amount of computing resources, not all willing miners can join in by simply purchasing a dedicated hardware for the job. Most of them are more likely to join existing and larger mining pool.
They can do this by joining cloud mining, where they rent mining hardware (or a portion of their hashing power) and having someone else do the mining for them. These people are typically ‘paid’ for their investment with Bitcoin or other cryptocurrency.
But for more willing investors with a lot more money, they can certainly create their own mining company.
Over the years, the increase in the number of miners has caused the total energy consumption of the Bitcoin network to grow to epic proportions. As a result of this, the entire Bitcoin network energy consumption is often compared to the energy consumption of a number of countries.
Back in 2017, Bitcoin mining already consumed more electricity than 159 countries in the world. In 2019, Bitcoin energy consumption was equivalent to Austria's.
It's even said that 60% to 80% of Bitcoin mining revenue goes straight back into paying for electricity. Back in 2018, it was said that Bitcoin mining was more expensive than mining gold. So miners really, really want to save as much on their electricity bills as possible.
This is why many miners started their quest for cheapest kilowatt by started mining in remote regions of China and Mongolia, for example.
The more energy it needs, the larger the carbon footprint it generates.
While an increasing number of countries are starting to rely on green renewable energy sources, many parts of the world are still relying on coal-based power, either directly or indirectly (load balancing).
Making things worse, most of the mining facilities in the Bitcoin network are said to be located in concentrated regions, primarily in China. Particularly in Sichuan, where cryptocurrency miners in that China region were responsible for 54% of the total Bitcoin hash rate back in 2019.
However, this is merely a prediction based on calculations. Bitcoin network is spread all over the world. And since Bitcoin miners often want to remain anonymous and keep their operations opaque, knowing the exact locations of miners is difficult.
Regardless where the miners are, they require electricity to operate. And because there are many countries that still rely on fossil fuels, Bitcoin mining that hungers for power, requires more coal to be burn.
What this means, the more carbon footprint the process of mining is giving back to the planet.
Simply put: coal is fueling Bitcoin.
While more and more countries are capable of decreasing their reliance on fossil fuels by utilizing renewables as the intermittent source of energy, Bitcoin miners have a constant energy requirement.
Once purchased and turned on, A Bitcoin ASIC miner will not be switched off until it either breaks or becomes unable to mine Bitcoin at a profit. Because of this, Bitcoin miners increase both the baseload demand on a grid, as well as the need for the ever-ready fossil-fuels.
In the worst case scenario, the presence of Bitcoin miners in a region (legal or illegal) may force the construction of new coal-based power plants, or reopening existing ones.
However, there are critics that say otherwise. Some suggest that the network has limited environmental impact.
CoinShares for example, said that the Bitcoin network gets 75% of its electricity from renewables like wind, solar, and hydropower. This makes it “more renewables-driven than almost every other large-scale industry in the world.”
CoinShares also pointed out a broader problem for how renewable energy can be deployed on more mining pools, by saying that many renewable power generators are so poorly located and underused that mining bitcoin has become the only viable use for that electricity.