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What Makes Bitcoin Mining So Power Hungry?
Bitcoin witnessed a dramatic surge in its value during the coronavirus pandemic. It reached new heights, taking the digital currency world by storm; however, its fortunes continue to be on the edge due to the currency's volatile nature.
The digital currency has come a long way since it was created in 2008 when early buyers recognized it as a means of bypassing capitalist institutions. But, it hasn't been all well for Bitcoin, as with time its inefficiencies also came to light. Things such as lack of consumer protection to encouraging crimes such as black-market trading and money laundering have raised concerns over the digital currency.
Bitcoin Mining Hurting The Environment
Perhaps its most eyebrow-raising issue is the massive environmental impact of Bitcoin mining, the process to bring more virtual coins into circulation. Despite being unregulated, Bitcoin still needs to verify all transactions that happen between traders to avoid any frauds and gives this responsibility to "miners," who work as auditors by updating a ledger called a blockchain.
To do so, miners try to guess a random number, one of which gets released around every 10 minutes. This process involves crunching complex mathematic equations that require high computing prowess. Getting there first means getting rewarded with a Bitcoin. As the blockchain grows, the calculations become even more complex.
A whopping 150 quintillion attempts are made every second globally to guess the number, with huge areas filled with supercomputers working day in and day out. These crypto farms need huge amounts of electricity to carry out their business, as one Bitcoin transaction leaves behind a carbon footprint of 360kg. To put things in perspective, a Visa transaction leaves a carbon footprint of 500 mg.
Bitcoin Mining Causing Supply Issues
These farms are mostly set up in areas where power is cheap - China's Xinjiang Province-for instance. The place is abundant with coal and is still responsible for two-thirds of China's power consumption. These mines are not only dependent on fossil fuels but their huge electricity usage adds to accelerating carbon emissions.
The yearly power consumption of China's Bitcoin industry is expected to hit 297 terawatt-hours (TWh) in two years, which means it will exceed the carbon emissions out of Qatar and the Czech Republic. As per a recent analysis by the University of Cambridge, Bitcoin mining eats up over 121Twh per year, which would make it the top 30 power consumers globally if it were a country.
Another environmental impact of the digital currency's mining setups is its dependency on short-lived hardware required to crunch complex equations, which spike the demand for microprocessing chips. Many OEMs that develop these chips are facing significant hurdles in meeting the demands. This shortage has also impacted the production of other electronic items including smartphones, gaming consoles, and electric vehicles.
Not All Mining Is Bad
But there's a positive side to this as well. Countries like Norway and Iceland have also seen deployments of crypto farms. These nations churn their power from renewable energy sources which can come in handy for Bitcoin mining without leaving a carbon footprint.
Cryptocurrencies such as Cardano used in Inner Mongolia claim to be 4m times more energy-efficient than Bitcoin due to its "Proof-of-Stake" blockchain. The transactions here are validated based on how many coins are held by a network participant, unlike Bitcoin blockchain where the validation depends on the computational processing power participants possess.
Whether Cardaon or other rivals such as Ethereum can dethrone Bitcoin remains to be seen, but the current rate of energy consumption should stop if global warming needs to be controlled.