Blockchain technology is emerging as the future of secure and decentralized transactions, with its potential extending far beyond the finance sector. It has now found applications in various industries, including healthcare, supply chain, and higher education, where its benefits are being realized. However, as its adoption increases across industries, industry leaders are engaged in a heated debate over concerns about its energy consumption.
Read More: Blockchain Technology: A Catalyst for Sustainable Development
What is Blockchain?
Blockchain technology is a revolutionary way of maintaining and updating a database over a network of computers. Its mechanism involves adding new data one ‘block’ at a time, with each block linked to the previous one. The continuous addition of new blocks forms a chain of blocks, hence the term ‘blockchain.’ The decentralized nature of blockchain eliminates the need for intermediaries, which reduces transaction costs and enhances efficiency.
This technology is particularly well-suited for cryptocurrencies since data added to the blockchain is immutable and cannot be deleted or altered. Moreover, many blockchains operate in a decentralized manner, with data being simultaneously stored and updated across the network. This eliminates the possibility of tampering, as any discrepancies between versions would be quickly identified.
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What is Blockchain Mining and How Much Energy Does It Consume?
The process of adding a block to the blockchain involves solving complex mathematical problems, commonly known as mining. As the size of the blockchain grows with the addition of more blocks, the computational power required to validate a new block also increases. This has led to miners using specialized hardware, such as ASICs and GPUs, which has resulted in a significant increase in energy consumption. According to some estimates, Bitcoin, the largest cryptocurrency, currently consumes approximately 150 terawatt-hours of electricity annually, which is more than the entire country of Argentina, whose population is 45 million. This energy consumption produces roughly 65 megatons of carbon dioxide emissions annually, equivalent to Greece’s emissions, making cryptocurrency a substantial contributor to global air pollution and climate change. It is worth noting that Kazakhstan, now the world’s second-largest Bitcoin hub, generates around 50% of its energy from high-emissions coal-powered plants.
Reasons Behind Increased Energy Consumption!
Miners who contribute new blocks to the blockchain network are rewarded with cryptocurrency tokens, making it a lucrative pursuit. This can result in significant earnings for miners, which can be traded or held for long-term appreciation in value. Furthermore, with the ever-increasing value of cryptocurrencies, the potential profits from mining are soaring. As of today, a miner is awarded 6.25 Bitcoin for adding a new block, with one Bitcoin valued at $22,175.47. The current market capitalization of the approximately 19,000 cryptocurrencies in circulation is around $1.75 trillion, equivalent to the gross domestic product of Italy, the world’s eighth-largest economy.
In addition to these rewards, miners receive processing fees for the transactions in the block they add to the chain.
All, these rewards are essential as they incentivize the work required to keep the blockchain network operational.
It is not surprising that more and more people are consuming higher amounts of electricity to mine the remaining resources.
Is Blockchain Energy Consumption Sustainable?
The exponential rise in energy consumption required to maintain the blockchain network while adding new blocks has sparked concerns about its sustainability. Critics of the industry argue that the energy consumption associated with blockchain is not only unsustainable but also environmentally damaging. However, proponents of the technology have divergent perspectives on the matter. They believe that the benefits of blockchain outweigh the costs and that it has the potential to contribute to a more sustainable future.
Read more: Green Blockchain: The Future of Sustainable Technology
Efforts to Improve Blockchain Sustainability
Initiatives such as the Bitcoin Mining Council and the Crypto Climate Accord are introducing new, more energy-efficient ways of mining cryptocurrencies. The latter has set a goal of operating all blockchains on entirely renewable energy by 2025. Nonetheless, addressing issues related to e-waste and other environmental consequences is still necessary to ensure the sustainability of the blockchain industry.
To achieve greater energy efficiency, there are efforts underway to redesign blockchain systems by moving away from proof of work (PoW), which is a decentralized consensus mechanism that requires network members to expend effort in solving an encrypted hexadecimal number, and towards other systems of validation. One such system gaining popularity is proof of stake (PoS), which involves selecting users to validate new blocks of transactions and earn rewards for their accurate performance.
Moreover, several countries have already begun regulating the energy consumption associated with mining. For instance, the Chinese government has placed restrictions on the mining of Bitcoin and other cryptocurrencies. Other nations, including Canada and Iceland, are promoting the use of renewable energy sources to power mining operations.
Final Deduction
Undoubtedly, blockchain has the potential to transform the way businesses transact. However, it is crucial to take into account the environmental and social costs associated with this technology. While initiatives aimed at enhancing the sustainability of blockchain are commendable, it is the responsibility of developers, miners, and users to ensure that the benefits of this technology are achieved without endangering the environment.
