Dogecoin. Bitcoin. Etherium. Cardano. Even if you don’t know how cryptocurrencies work (and no pressure, it’s complicated), you’ve probably heard these names.
Though the value of crypto is down right now, it’s not going away anytime soon. Crypto production is constant, and there’s a magnifying glass on the energy it consumes. So much so that it has influenced a handful of countries, including China, to ban crypto creation and usage.
So why does crypto use so much energy? Computers “mine” the currency by offering processing power to verify other crypto transactions. In return, an additional piece of the currency is created and rewarded to the computer that verified the transaction. The most powerful computers mine more effectively, because they can verify more transactions.
It takes a lot of power to run these computers, but if crypto continues to scale, it’s a new type of problem the currency creators will have to solve for. About .5% of the world’s electricity is used to mine Bitcoin, which is about equal to how much power Sweden uses annually.
Luckily Etherium, the second largest currency, has successfully changed its system to be eco-friendlier. Rather than rely on state-of-the-art computers that offer processing power, people can now use much more affordable (and lower-energy consuming) tech. Etherum is awarded to owners who “stake” their currency to help validate other transactions. The result? Ethereum used to use an estimated 24 million megawatt-hours a year, but it’s predicted to use just 2,600 now instead.
Bitcoin is reluctant to make this change for several reasons. The cryptocurrency was created with a mission to decentralize currencies — meaning no one person or group can have too much control. With the “proof-of-stake” system Ethereum uses, the more currency you stake, the more likely you are to be rewarded. Since currency ownership is anonymous, it can theoretically lead to a handful of people having enough crypto to run the market and manipulate the decentralized system.
Bitcoin’s is also the largest player in the game, and their “proof-of-work” system has been tested for 10+ years. There’s less of an incentive for the system to change when the security risks are unknown with proof of stake.
Finally, Bitcoin was built on the mining and proof-of-work system, meaning the community that’s helped grow it has invested in high-cost technology already. Changing the system would cause backlash to Bitcoin’s main user group, which could hurt the value of the currency.
We’ve done our best to offer a simplified overview, but if you’re ready to dive further into how proof of stake works or the challenges crypto has with going green, check out the related articles. And if you’d like to see how we could reuse waste heat form computers and servers, be sure to check out this video.