What makes Bitcoin such a great idea is the fact that you don’t need third parties in order to validate transactions. And because of this concept, you also have a currency that isn’t tied to a particular economy. However, one of the biggest concerns about Bitcoin and cryptos is mining operations. Bitcoin mining is known to be energy intensive. In fact, it is said that Bitcoin mining operations worldwide is enough to power an entire country.
And not only that, there is a study saying that if this type of mining operation persists, we will soon raise the temperature of the earth by 2 degrees Celsius. This has been a concern for many countries. A lot of miners are going to places with cold weather and cheap electricity in order to run an efficient mining operation.
Proof of Work
Bitcoin mining process makes use of Proof of Work algorithm which basically involves computers to solve cryptographic puzzles in order to prove block transactions. It is then recorded in a blockchain or a public asset ledger. Over the years, it has become a problem. According to a 2016 article, Bitcoin mining’s annual energy consumption was at 3.39 TeraWatt hours (TWh).
During that time, it was equivalent to the power consumption of Jamaica. And unfortunately, it has risen exponentially. And in fact, it has exceeded the energy needed in order to mine physical metals. It was also discovered that the amount of CO2 emitted in Bitcoin mining is at 3 million to 13 million metric tons just in the first half of 2018. And this could go worse if Bitcoin gets adopted.
Shift in Energy Systems?
It is said that once Bitcoin gets adopted, it is going to be logical that there will be a “shift in energy systems”. This only means that if Bitcoin hits the mainstream, we can also expect that there will also be the rise in the use of renewable energy systems.
Ethereum is hoping to solve this problem by shifting their algorithm towards Proof of Stake. This method is quite different from Proof of Work. Miners are not involved in energy-intensive calculations. Ethereum’s proof of stake introduces penalties on miners that are simultaneously producing blocks on two versions of the blockchain, despite only one is considered valid.
Issues in Today’s Bitcoin Mining
There are other issues when it comes to mining. For instance, you have the price of Bitcoin that wasn’t able to recover its all-time high. Bitcoin miners are believed to be losing every month since Bitcoin has only been floating around $6,200 to $6,500 for quite some time. In fact, it is less volatile these days compared to tech-related stocks. Though there are those who are anticipating a bull run, that is still not yet a sure thing.
Also, you have the fact that majority of Bitcoin miners are now found in China. 70% of the hash rate in the network belongs to Bitcoin miners in the country. Now, considering China’s anti-cryptocurrency stance, regulators could potentially play a role in Bitcoin by having some sort of control over the miners.