Bitcoin is soaring, and with the meteoric rise in the value, the Bitcoin mining industry is attracting a whole new generation of miners. The lucrative crypto mining industry has seen tremendous growth in recent years, but now due to the network’s scalability issue and high energy demands, it is attracting a massive critical crowd.
Recently, a few countries, like Venezuela, have had to cope up with electrical blackouts due to a sudden increase in power-hungry Bitcoin mining activity.
According to a detailed report by Digiconomist, the entire Bitcoin mining network is consuming energy similar to the energy usage of countries like Oman, Morocco, Serbia, and Denmark.
For instance, the energy consumed by the Bitcoin mining industry is equal to the energy needs of 48.4 percent of the Czech Republic, 24.4 percent of the Netherlands, 9.8 percent of Great Britain, 5.7 percent of Germany, and 0.8 percent of the US.
As per Digiconomist’s estimation, the mining network is consuming more than 32 TWh of electricity, which exceeds the requirements of 159 separate countries worldwide.
How Bitcoin mining works
Though Bitcoin is a revolutionary step, its network has many issues. For one thing, it is facing huge scalability issues, the solution to which are very complex and hard to implement.
The network allows the addition of a new block in around 10 minutes by the so-called miners. They are strictly dependent on the piece of code that runs Bitcoin and generates new blocks. As the consensus mechanism, the network is using Proof-of-Work to validate each block. This mechanism is very costly as it requires every node in the network to validate each block.
If the network accepts the new block created by a mining node, it will receive 12.5 Bitcoins as a reward. Thus the mechanism is very random as every mining node is in a constant race to build a new block and claim that reward. This leads the miners to use power hungry processing units like high-performance GPUs which lead to massive energy consumption.
Addition to the carbon footprint
Also, the Bitcoin mining industry is very concentrated, and almost half of the mining rigs are located in China. Though China’s low electricity cost attracts the mining players in the country, most of the countries energy needs are catered to by coal-fired power plants. This leads to a huge carbon footprint for each Bitcoin transaction.
In a world where climate change is a challenging thing to tackle, and almost all countries in the world signed the Paris Agreement in 2016 , pledging to reduce their carbon footprints, Bitcoin mining is a huge issue.
What are the alternatives?
As a solution to this inefficient network of Bitcoin, many experts are suggesting the miners to ditch the “Proof-of-Work consensus mechanism and adopt the efficient Proof-of Stake mechanism. With the latter, only coin owners create new blocks, not miners, thus reducing energy consumption.
Many suggest more efficient mining technology. The introduction of the Lightning Network will make the network much more efficient too.
Whatever the future may be, the recent growing energy demand by the cryptocurrency networks is a huge concern. Eric Holthaus, a climate change advocate, stated: “In only a few months from now, at Bitcoin’s current growth rate, the electricity demanded by the cryptocurrency network will start to outstrip what’s available. New stress on the grid means more facilities using dirty technologies. By July 2019 the bitcoin network will require more electricity than the entire United States currently uses. By February 2020 it will use as much electricity as the entire world does today.”