Brian McCowan, Zondits staff, 12/6/2022
Cryptocurrency has long been criticized for the outsized energy usage involved in mining new coins and verifying transactions. But now CNBC and other news outlets are reporting that one of the largest cryptocurrency operations, Ethereum, has adopted new algorithms that dramatically decrease energy consumption.
The revised system for minting new Ethereum Ether coins, securing its networks, and verifying transactions (collectively known as mining) is termed “proof-of-stake.” Proof-of-stake is replacing a system called “proof-of-work,” which has been used to mine Ether since their currency models was first introduced.
Cryptocurrency pundits are not expecting the Bitcoin network to follow the same path as Ethereum for the foreseeable future, despite pressure to “green” their processes. The proof-of-work process involves intensive computing power to basically “guess” winning numbers to mine new coins. This process is highly energy intensive with huge data centers being dedicated to the mining process.
CNBC reports that identifying a winning number using the proof-of-work process takes more than 100 sextillion tries. It is claimed that this process improves security by making it difficult for cryptocurrency hackers to harness enough computing power to interrupt the network. But this security comes at a huge energy and environmental cost as researchers estimate that in 2020 alone, bitcoin mining consumed over 75 terawatt hours of electricity. A portion of that energy is generated from renewable sources and efforts to expand clean energy coin mining are underway.
In 2018, Zondits published several articles regarding concerns over the alarming energy intensity of cryptocurrency mining. And in 2021, the New York Times reported that Bitcoin mining consumed more electrical energy than the entire country of Finland, and was about equal to one-third of the energy used per year for air conditioning across the entire United States.
Ethereum is leaving that guessing game behind by replacing mining with a “validation” process. Validators are assigned to validate new transactions. Validators are rewarded for their efforts with Ether coins and are required to pay security deposits in order to assure secure and honest transactions.
Ongoing environmental concerns over cryptocurrency energy impacts are viewed as a major driver for adopting the new strategy. Bitcoin is also under such pressure and some miners are supporting renewable energy projects as an incremental solution. An additional Bitcoin approach reported by CNBC and other sources has been an attempt to portray the massive energy usage as a public benefit as it promotes investment into the nation’s aging electrical grid.
Need a primer on cryptocurrency? You are not alone. Forbes advisor has a coherent one online: What Is Cryptocurrency? – Forbes Advisor
Read more about cryptocurrency:
- CNBC.com article: How Ethereum’s Merge Made Crypto Mining More Sustainable
- NYTimes.com article: Bitcoin Uses More Electricity Than Many Countries. How Is That Possible?
- Zondits.com article: The Growing Energy Demand of Bitcoin
- Zondits.com article: Cryptocurrency Miners Will Be Charged Higher Power Rates In New York
- Zondits.com article: Utilities Grapple with a Growing Cryptocurrency Market
- Zondits.com article: The Uncertain Future of Cryptocurrency