Bitcoin Is Reducing Its Carbon Footprint And That’s Great News For Everyone
Bitcoin’s meteoric rise to the top seemed impossible when it came down to cryptocurrencies. One Bitcoin cost USD $64804 at one time in April 2018. Two major news stories triggered the fall.
First and foremost, Elon Musk raised the issue of using fossil fuels to power Bitcoins. He also cited Tesla’s huge energy consumption as a reason for not accepting payments in cryptocurrency. China also cracked down on more than half of its Bitcoin mining operations. China’s energy use was cited as one reason.
Bitcoin and Energy Consumption
It is essential to understand how Bitcoins work, and how they use energy in order to make these decisions. According to the Cambridge Center for Alternative Finance, Bitcoin consumes approximately 110 Terawatt hours per year. This is roughly equal to the annual energy consumption of small countries such as Sweden or Malaysia.
This sounds like a lot. Why does Bitcoin require so much energy? Bitcoin came up with the concept of Proof of Work. In this system, two parties verify the transactions and records stored in a blockchain. To participate in the verification process of the blockchain, these separate parties must use computers that are specially designed and have access to lots of energy.
Bitcoin is distributed, which means that no central authority holds rights to it. Computers from all around the globe work together towards verifying the process that rewards miners for their efforts with Bitcoin.
Why green cryptocurrency matters –
The energy required to generate them has seen a dramatic increase in demand, as more cryptocurrency join Bitcoin. To power what many believe will soon be the digital currency of tomorrow, it seems counterproductive to use fossil fuel-emitting energy sources like coal.
Bitcoin mining is not only a significant threat to nations’ compliance with the Paris Climate Treaty norms, but it is also a major hindrance to their ability to adhere to them. All of these points make it clear that a greener alternative is needed to Bitcoin mining.
The institutionalization of Bitcoin is likely to happen sooner than expected with companies like Paypal and Mastercard, as well as countries such El Salvador that will be using cryptocurrencies for transactions and making it legal tender. Musk himself has said that he will look into accepting Bitcoins again, even though the earnings report this week showed that Musk’s company had $1.3 billion in Bitcoin.
It is essential that institutions and businesses adopt Bitcoin in order to win over environmentalists and climate sceptics.
To reduce the carbon footprint of cryptocurrencies, there have been initiatives all over the world. El Salvador plans to make Bitcoin legal tender in September. It will use geothermal energy from volcanoes for electricity generation to mine cryptocurrency.
The new Proof-of-Stake protocol is being used in Blockchain applications. This is an alternative to the Proof-of-Work protocols that require users solve problems. Proof-of-Stake isn’t about solving complicated mathematical puzzles that take a lot of energy. It only requires that you prove that you have money in the bank.
Ethereum, second most popular cryptocurrency, is currently in the middle of a complex transition from proof-of-work to proof of stake. While there are cryptocurrencies such as Avalanche and Cardano that use Proof of Stake instead of Proof of Work, they are still relatively small and have a limited impact on the crypto-world compared to giants like Bitcoin or Ethereum.
Another way that green technology is moving to cryptocurrencies is through Sharding. Ziliqa’s blockchain platform uses Sharding to divide blockchain workloads into separate sets of nodes or shards. Each node is only responsible for processing the assigned shard’s data, so overall energy consumption is lower.
The transition to Ethereum’s Proof of Stake framework and all its changes, as well as countries like El Salvador that use green energy alternatives, means that Bitcoins are now fundamentally poised for a change in the way they function. This will also mark the beginning of a new phase, which is more in line with environmental and carbon neutral goals.
Although it is not an easy process to transition to green energy, the willingness and initiative shown by cryptocurrency will be a boon for the planet and its people in the coming months. Skeptics and environmental lovers who had previously resisted investing in cryptocurrency due to its high energy consumption can now rest easy knowing that cryptocurrencies are sustainable and long-lasting.