With the need for more eco-friendly and sustainable practices coming to the forefront of nearly every industry, digital currency is certainly on that list.
Bitcoin, the first digital and decentralised currency was once met with caution and suspicion. It gradually managed to establish itself as a legitimate currency, but that’s not the end of its evolution.
In recent times, experts have warned about the high consumption of cryptocurrency and its environmental impact. This has resulted in the desire for more eco-friendly, sustainable and renewable cryptocurrency mining methods.
How the perception of cryptocurrencies has changed
Just short while ago, Elon Musk declared that Tesla had stopped any future purchases using Bitcoin amidst concern over the increasing use of fossil fuels to mine the cryptocurrency and the subsequent negative effects of climate change. This was a powerful move from a voice that was once one of bitcoin’s most notable boosters and resulted in Bitcoin shares quickly falling by 10% and Tesla’s dipping slightly also. Musk has since reconsidered and Tesla is looking into detail at the true environmental cost of mining cryptocurrencies.
Back in 2009, Bitcoin was released. The idea of a digital currency was very new and shrouded in mystery, however, those in the know were rewarded significantly for their investments in Bitcoin years later.
The mystery and suspicion generated inaccurate opinions on what bitcoin was and most were not positive. Even though the spread of misinformation surrounding cryptocurrencies lessened over time, the fact that information on bitcoin was still scarce didn’t help its cause.
With time, the information and knowledge of bitcoin has heightened and lifted some of the scrutiny. Trading bitcoin and other cryptocurrencies have become trendy and thanks to the development of apps and bitcoin trading software, purchasing is now available to everyone.
Why cryptocurrency mining requires energy
As the perception of bitcoin has become clearer, the demand for it has become greater, therefore, increasing the need for supply. Bitcoin and other ‘proof-of-work’ cryptocurrencies require large amounts of energy to source due to the computations needed to mine for them. On top of this, 65% of all bitcoin mining is in China where most of the energy is generated from burning coal and subsequently having a negative effect on climate change due to the carbon dioxide being produced.
The awareness that most cryptocurrencies require a vast amount of energy is becoming more apparent and is becoming one of the biggest sticking points in bitcoin mining. Cryptocurrency transactions are recorded not by storing account balances on a central database, but instead are recorded by a complex network of miners that require a huge amount of energy to run.
Another major concern for the environment is as the price of cryptocurrency increases, mining tends to become less efficient. Specifically for bitcoin, the complex maths problems that create and sustain bitcoin get more difficult and the network consumers more computing power and energy over time, despite producing the same number of transactions.
Why cryptocurrencies are relying more on renewable energy
In recent years there has been talk of ‘green cryptocurrencies’ – more eco-friendly bitcoin alternatives mined with renewable, sustainable energy. With all this talk, new cryptocurrencies have emerged which are proactively eco-friendly, including Chia.
Traditional cryptocurrencies have a ‘proof-of-work’ system, but with Chia it is instead using a ‘proof-of-space and time’ system. According to Euro News, to ‘farm’ Chia, you need many empty hard disks to house ‘plots’ which are then awarded a number of blocks based on available space. This method could be a more reliable source, secure and sustainable.
There is a substantial amount of mining that is currently being powered by renewable sources, however, the exact amount is uncertain. Studies have predicted amounts between 39% and 74%.
As the environmental effect of cryptocurrency is under intense scrutiny and with the development of technology, it is likely that over time the transparency of how ‘green’ cryptocurrencies are will be crucial. With this, there will gradually be more active practices in making cryptocurrencies greener.