Monday, May 16 2022 Sign In   |    Register
 

News Quick Search


 

News


Front Page
Power News
Today's News
Yesterday's News
Week of May 09
Week of May 02
Week of Apr 25
Week of Apr 18
Week of Apr 11
By Topic
By News Partner
Gas News
News Customization
Feedback

 

Pro Plus(+)


Add on products to your professional subscription.
  • Energy Archive News
  •  



    Home > News > Power News > News Article

    Share by Email E-mail Printer Friendly Print

    Cryptocurrencies and energy consumption


    January 26, 2022 - CE Noticias Financieras

     

      In the last five years, the price of a bitcoin has skyrocketed from around $1,000 to over $60,000. That's great news for the newly minted millionaires, but it's a disaster for the environment.

      The electricity needed to "mine" the coins, employing vast fleets of computers to solve complex calculations, has increased tenfold during that same time, to almost as much as the entire country of Argentina uses.

      That energy consumption moved Tesla Inc. chief executive Elon Musk to ban bitcoin car purchases, and China banned mining in part because of the strain it placed on its power grid.

      "If bitcoin continues to be seen as a carbon-intensive, energy-hungry system, it's a huge risk," warns Kirsteen Harrison, sustainability strategist at Zumo Financial Services, a British cryptocurrency wallet service.

      In response, some "miners" have located their computers in places like Iceland or Sweden with abundant geothermal or hydropower, while others have bought carbon credits to offset their emissions. But with every kilowatt of cleaner energy needed to cook food, heat homes or move people and goods, there is an increasingly urgent sense that cryptocurrencies should find a better way to operate.

      "There will be a limited amount of clean energy in the next few years, and it should go toward meeting existing energy demands," says Ben Hertz-Shargel of energy consultant Wood Mackenzie.

      The situation has made it necessary to explore other methods of ensuring the security of digital currencies. Most early cryptocurrencies rely on what is called proof of work, which is all those calculations that miners' computers do. The goal is to be the first to find the answer to a complex problem, which gives the miner the right to record transactions on the system's blockchain, the digital ledger that validates who owns which coins and, more importantly, hands out new ones.

      While many home computers could do the job a decade ago, mining today requires sophisticated machines that consume large amounts of electricity. And consumption generally increases as the price of coins increases, because the complexity of the problems grows as more miners join.

      The most popular alternative method is called proof of stake, where several parties pledge or bet their coins to become validators. These individuals get new coins in exchange for verifying the legitimacy of transactions and deciding which ones will be processed first.

      No special equipment is needed; the competition is not about quickly solving a problem, but about how much each party is willing to put up as collateral. Proponents say the system is secure because those who approve transactions that turn out to be fraudulent lose the coins they pledged. Typically, several validators examine each batch of transactions, but most new coins go to a single party, chosen in a sort of lottery in which those who pledge more coins get more tickets.

      Ethereum, the blockchain that underpins the world's second most relevant cryptocurrency, plans to migrate next year from proof-of-work to proof-of-stake, arguing that the move will reduce its energy consumption by 99.95 percent. A test version called Beacon Chain has been running alongside Ethereum's proof-of-work system for nearly a year, with more than 250,000 validators betting around $38 billion in ether, according to analytics platform Etherscan.

      The coin's original network "is a 6-year-old technology, not designed for the level of use and security needs of 2021, and certainly not 2025 or 2030?, says Aaron Brown, a crypto investor contributing to Bloomberg Opinion.

      Dozens of other cryptocurrencies use models based on this idea. Solana, a coin introduced last year that has become the fifth-largest cryptocurrency by market capitalization, has a variant in which transactions receive timestamps to speed up processing.

      Algorand gives all users the opportunity to be randomly and secretly selected to propose and vote on batches of transactions that need confirmation, and each user's influence depends on the number of tokens he or she owns. Tron allows users to elect delegates, called super representatives, to validate transactions in six-hour shifts and receive new coins for their work.

      And Filecoin uses a technology in which parties compete to provide bandwidth or storage space to the network in exchange for new coins.

      Critics say these alternatives may be less secure than proof-of-work. The computer code underpinning proof-of-participation is so complex that there is a higher risk of undetected software bugs, says Chris Bendiksen, a researcher at digital asset investment manager CoinShares. And such systems are more susceptible to censorship, because once one entity or group acquires more than half of the tokens, "there is no way for them to be deposed as the controlling entity," he says.

      "Errors and vulnerabilities in critical infrastructure, such as monetary systems, can be catastrophic."

      Developers of proof-of-stake systems respond that, in proof-of-work, a small number of miners generally control most of the network, which opens the door to manipulation. With proof-of-stake, proponents say, the only way for users to increase their influence is to increase their participation, which makes it harder, and more costly, to cheat the system.

      In the view of Tim Beiko, a computer scientist who coordinates Ethereum's developers, the years his network spent perfecting its proof-of-stake technology and the extensive testing it has undergone show that these less energy-consuming alternatives can chart a new future for cryptocurrencies. Proof-of-work "doesn't make sense for most chains, and Ethereum is a great testing ground for both larger and smaller chains."

    TOP

    Other Articles - International


    TOP

       Home  -  Feedback  -  Contact Us  -  Safe Sender  -  About Energy Central   
    Copyright © 1996-2022 by CyberTech, Inc. All rights reserved.
    Energy Central® and Energy Central Professional® are registered trademarks of CyberTech, Incorporated. Data and information is provided for informational purposes only, and is not intended for trading purposes. CyberTech does not warrant that the information or services of Energy Central will meet any specific requirements; nor will it be error free or uninterrupted; nor shall CyberTech be liable for any indirect, incidental or consequential damages (including lost data, information or profits) sustained or incurred in connection with the use of, operation of, or inability to use Energy Central. Other terms of use may apply. Membership information is confidential and subject to our privacy agreement.