Bitcoin Mining Is Not Climate-friendly. Can It Be?

bitcoin mining is not climate friendly can it be
bitcoin mining is not climate friendly can it be

Bitcoin mining is not climate-friendly. Can it be? #Bitcoin #mining #climatefriendly Welcome to TmZ Blog, here is the new story we have for you today:

This story is part of Recode by Vox’s Tech Support series, which explores solutions for our warming world.

People have many feelings about bitcoin. It’s the cryptocurrency that started it all, the progenitor of a thousand memes, a thousand more questions, multiple dubious salary decisions, and an entire industry built around its promise of a financial revolution.

It’s also a point of contention. Some countries have embraced bitcoin wholeheartedly, with El Salvador saying the cryptocurrency will give more citizens access to banking; others have outright banned it from their borders, citing the risk of criminal activity. Wherever you stand on bitcoin, though, one fact is undeniable: Bitcoin is extremely energy-hungry. One oft-cited example is that it uses more energy than the annual consumption in countries like Finland or Denmark — and that’s concerning in a world that’s already on track to blow past its climate goals, thanks in large part to fossil fuel emissions from energy consumption.

That problem is partly why Intel, one of the largest chipmakers in the world by revenue, recently unveiled Bonanza Mine, its first computing chip specially designed for mining bitcoin in an energy-efficient way. According to Intel, the Bonanza Mine chip would allow bitcoin miners to get the same amount of bitcoin for less energy. Problem solved, right?

Not quite. While Intel may be one of the biggest chipmakers getting into the bitcoin game, other companies have for years been working on making their chips more energy efficient without any resulting drop in the energy used by mining operations. The reason, experts say, is due to a fundamental paradox at the heart of how bitcoin mining works — and that paradox could have far-reaching implications for the climate crisis.

“There hasn’t been any time in the history of bitcoin where increasing machine efficiency led to less energy consumption,” said Alex de Vries, founder of the website Digiconomist, which tracks the sustainability of cryptocurrencies.

Bitcoin, along with many other cryptocurrencies, works on a simple concept: Every 10 minutes, the bitcoin protocol — essentially, the code underlying bitcoin — generates a math equation with a numerical solution. In order to mine bitcoin, you need to guess what that solution is. As more people (i.e., computers) try to guess that number, the protocol adjusts itself to make the number harder to guess, so more computing power is needed to make more guesses quickly.

In computing-speak, this is called proof of work: The more work you put in, the more bitcoin you get out. In the early days of bitcoin, the math equations were less complicated and you could mine bitcoin fairly quickly using just a home computer. But as bitcoin grew in popularity and more people got into the mining game, the computing power (or the “work”) needed to find the right numerical sequence grew as well. Today, companies invest millions in setting up giant mining operations outfitted with rack upon rack of specialized bitcoin-mining computers that consume huge amounts of energy.

When crypto mining operations are set up in a new location, their owners often negotiate with local utilities for predetermined electricity rates. The miners are promised they’ll get a certain amount of energy each month for a fixed price, and in return the utilities don’t have to worry about trying to account for energy demand from those mining operations fluctuating as equipment ages or mining rigs are taken on or offline. Without those energy needs predetermined, utilities could end up generating too much or too little energy — which could lead to brownouts or blackouts.

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For bitcoin mining companies, the equation is pretty simple: The more bitcoin that can be mined using a unit of energy, the higher the profits. So even if they’re using energy-efficient machines, there’s no reason for those miners to use any less energy than before, especially if the energy has already been paid for. Proof of work always incentivizes doing more work.

“If you have more efficient machines that require less electricity per unit, your electricity budget doesn’t change,” de Vries told Recode. “You just employ two machines instead of one.”

All that energy consumption comes at a significant cost to the environment. Most utilities across the country still depend largely on fossil fuels to generate electricity, and supplying the energy needed for bitcoin mining often means burning even more fossil fuels. Late last year, a utility company in New York state drew criticism for converting a shuttered coal plant into a natural gas-powered plant that would supply energy to a local cryptocurrency-mining operation. Even as the Biden administration moves toward transitioning the country to clean energy, those climate gains risk being undermined, at least in part, by crypto mining.

Proponents of bitcoin say the easy solution to this problem is to power mining operations with clean energy; some even go so far as to say crypto could help the environment. “If you flip the script, you can see the energy use of crypto is a feature, not a bug,” said Dip Patel, CTO of Soluna, a company that buys excess renewable energy to power cryptocurrency mining operations. (His comments echoed, word for word, testimony provided by Soluna’s CEO during a January congressional hearing on the environmental impact of cryptocurrency).

It’s quite common for renewable energy producers, like solar or wind farms, to generate more electricity than the grid may need at any given moment. Without batteries that can store that excess electricity, the energy instead ends up getting wasted — a practice known in the energy industry as curtailment. Crypto mining companies, Patel told Recode, can help by buying that excess energy and using it to run their mining operations. The energy producers can get paid for energy that would otherwise go to waste, and the crypto miners are able to power their operations without fossil fuels. In the best-case scenario, Patel said, crypto-mining operations can even help spur new renewable energy developments by offering developers guaranteed demand for their energy.

The idea is promising, but it has limitations. “I think it’s more of a narrative play,” said Justin Drake, a researcher at the Ethereum Foundation, a nonprofit that supports the ethereum blockchain platform and the ether cryptocurrency, which is the second most popular cryptocurrency after bitcoin.

More people around the world are scrutinizing bitcoin for its energy use and impact on the environment, and investors who want to make climate-friendly investments are growing wary of it, Drake said. Even if companies that only used excess renewable energy did become more common, he added, they would represent a minority of mining operations around the world. “The vast majority would still be drawing power from a coal plant or whatever.”

Bitcoin’s energy consumption is more of a symptom than a cause, and the goal should be to address the root issue by reducing the energy consumed by cryptocurrencies rather than just switching a few operations to run on clean energy sources. That’s why Drake and the ethereum community at large are proposing a more radical shift for ethereum: They want to switch from a proof of work system, which ethereum also currently runs on, to something called “proof of stake.”

A proof of stake model works something like a raffle. To participate, you need to hold a raffle ticket — in this case, a predetermined number of units of a cryptocurrency. Every few minutes, an algorithm selects someone to receive more of that cryptocurrency; the more of a cryptocurrency (i.e., raffle tickets) you have, the higher your chances of receiving even more.

This means that in order to participate in a cryptocurrency built on a proof of stake protocol, you need to be able to buy into that cryptocurrency using another currency, like dollars, euros, or even bitcoin — something that proponents of proof of work models like bitcoin say makes proof of stake unfairly weighted to favor the rich, whereas bitcoin, at least in theory, allows anyone with a computer to take part. The reality is quite different: Setting up a single bitcoin mining rig costs thousands of dollars, depending on the components used, which means only people with enough disposable income to spend that kind of money and then pay for the additional energy required to run the rig would be able to even consider mining bitcoin.

Proof of stake could be a solution to crypto’s energy woes because it requires far less computing power — and by extension less energy — than proof of work. Ethereum operations around the world currently use as much power as the Netherlands, and the Ethereum Foundation estimates switching to proof of stake will lead to a 99.95 percent drop in the cryptocurrency’s energy use. Instead of needing a dedicated mining rig, Drake said, ethereum users would be able to run their ethereum software on something as low-powered as a Raspberry Pi.

If ethereum makes the switch and those energy estimates pan out, it could have huge implications for the cryptocurrency world and the environment at large: Ethereum could become a model for creating cryptocurrencies that are also climate-friendly. The rigs currently used to mine ethereum would suddenly become obsolete, and they would have to be recycled or used for other applications.

Drake and his colleagues at the Ethereum Foundation hope to make the switch to proof of stake by July or August of this year, at which point the algorithm has been preprogrammed to set off a “difficulty bomb” that will make mining more difficult — but developing the code to make the switch to proof of stake is presenting difficulties of its own.

“Ethereum has been saying they’ll move to proof of stake in six months for the past six years, so I’m kind of skeptical,” said de Vries. “But if they were to succeed, they could realize energy savings by a factor of 10,000 times less energy.” Earlier this month, ethereum developers conducted a stress test of the software that will switch the network to proof of stake, declaring it a “huge success.”

But many people oppose switching to proof of stake; the differences between proof of work and proof of stake are the subject of long-running, hotly contested debates in crypto communities. Proponents of proof of work, like Soluna’s Patel, say the energy consumed by bitcoin also secures it, as someone trying to steal bitcoin would need to use a tremendous amount of computing power to successfully hack the bitcoin blockchain. A proof of stake model, Patel said, also runs the risk of power being concentrated in the hands of a few players who could buy the majority of the available coins (or, in the case of new currencies, their founders could simply reserve a large portion for themselves).

In theory, that would allow them to unilaterally make decisions that affect all the users of the platform in a process similar to how shareholders with a majority stake in a company can influence the company’s decisions. Their majority stake would mean they continue to receive more cryptocurrency than anyone else, making it difficult for others to wrest control away from them. That, Patel said, is no different from how banks operate nowadays — an idea that’s an***hetical to the ideals of decentralized finance that undergird how bitcoin works today.

“I don’t think it should be one versus the other,” Patel said. “I think they provide credible value for very different things.” Proof of stake, said Patel, would be great for applications that would benefit from centralization, like medical records that are administered by a hospital system.

Drake disagrees with Patel’s characterization of the downsides of proof of stake. The ethereum protocol, Drake said, is written in a way that both prevents unilateral decision-making and secures it against would-be hackers, with the added benefit that the protocol can strike back at attackers by destroying part or all of their cryptocurrency stake in a move known as “slashing.”

All these arguments over proof of stake and proof of work, however, may not get very far. Cryptocurrency mining companies — which have real influence over Bitcoin, even if it is decentralized — have already invested millions of dollars into the proof of work model, and convincing them to move to proof of stake, or some other method to reduce energy consumption, won’t be easy.

Cryptocurrencies are here to stay, at least for the foreseeable future, and while they may be digital, they will continue to have far-reaching effects on the real world. It’s vital that we find a way to make them coexist with the world many of their backers seem to want to leave behind.

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