We doubt whether there is anyone who hasn't seen the Shiba Inu Coin meme? Musk's madness for the Cryptocurrency (or his wilful manipulation of the Cryptomarket) making it more or less a "meme stock". It will be naive to ignore the upheavals in the Cryptomarket. Cryptos have the potential to challenge our preconceived notion of fiat money to become the "new-normal" mode of payment of this era.
Bitcoin (BTC) is the first digital currency to lead the #CryptoFever among the tech-savvy worldly fellows. The pseudonymous developer Satoshi Nakamoto developed Bitcoin. Satoshi wanted BTC to be medium for instantaneous, borderless transactions, without the high fees or foreign exchange barriers. Never-ever in his wildest dreams, he would have thought that his creation will become a speculating asset for the profit craving crowd and will value it at 1BTC=35lakhs.
An article in ET says that though the Government is chary with the crypto bourse, the GenZs of India are bullish on the "de-fi" prospects.
But how on earth does Bitcoin affect the Environment?
To understand this problem let me explain the design of cryptocurrency in layman terms (or let me say in "simple" terms).
Blockchain technology is the base of almost all cryptocurrencies (including Bitcoin). Blockchain is a database containing blocks of information. Each of the blocks has a unique Hash ID of 64-bit hexadecimal numbers and some information. The block also contains the Hash ID of the previous blocks and thus, they form a "chain" i.e., irreversible by nature.
Bitcoin has decentralized blockchain-based initiation i.e., the blockchain is not kept in a centralized server but remains distributed among fellow users. This creates a trust deficit because anyone can change the data in the blocks, to evade this problem Satoshi conceptualized the idea of "mining". The "miners" verify each of the blocks of data (containing information of transactions) and in turn, they get a cut from the parties involved in transactions and also the Bitcoin system offers them 6.25BTC (as of today, equivalent to Rs 2crore 20lakhs). In this way, a new coin gets added to the system. This is the idea of the "Proof of Work" concept.
But the crux of the "Bitcoin Mining" is:
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Only the first Miner who has produced the correct number gets the Money offered by the
system.
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The process of verification is guessing a 256-bit number <= the number produced by SHA256
hashing algo applied on the block. This process of verification is a computationally
heavy (very heavy!) task.
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When there is more computing power working to mine for bitcoins, the system automatically
increases the difficulty level of mining to keep block production at a stable rate.
In 2009, When the first bitcoin was mined, it was close to worthless, and people could mine a bitcoin even with a PC at home. But now there are close to 1 million unique active miners in the Bitcoin network alone. With this much computing crowd ordinary computers like ours, can’t perform such intense calculations and will simply melt (like butter..). For this purpose, we need powerful computing devices called rigs augmented with GPUs and ASICs with an efficient cooling system.
This is where the problem begins...
Power Hungry Machines: These powerful devices need a lot of electricity. Even the most efficient computers would still take about 13 terawatt-hours in a year. That’s enough to power the 3 million homes of the USA.
Bitcoin miners, uses 121 Terawatt-hours of electricity every year-more than the entire country of Argentina
-BBC 2021
The Ethereum network uses as much power as the entire nation of Qatar.
-Digi economist
Bitcoin mining generates about 35.95 million tons of carbon dioxide emissions each year, the same as New Zealand.
-CNBC
To remain profitable, bitcoin miners use the dirt-cheap source of electricity - COAL and FOSSIL FUELS, the major source of carbon emission. In search of cheap power, miners flocked to China. The Northern and Southwestern parts of China, which generate most of their energy from coal and hydropower plants, were the home of close to 70% of bitcoin miners, up until April this year.
According to a recent study of Cambridge University, approx. 61% of the energy used for the Mining BTC comes from non-renewable sources. But pro-crypto research firms, like Coin Shares, are proponents of BTC mining. They argue that 74.1% of the electricity powering the BTC network comes from renewable sources and thus, BTC mining is "more renewables-driven than almost every other large-scale industry in the world".
Electronic Waste adds another dimension: BTC Mining also generates a large amount of electronic waste as hardware often gets "roasted". Unlike other computer hardware, these circuits are often not reusable.
The bitcoin network alone generates BTC network alone generates a terrible 11.5 kilotons of e-waste every year.
-Digi economist
Let's NOT make it a moral debate...
Whether we are in favour of cryptocurrencies or against them, we have to agree upon the following points:
Bitcoin uses enormous amounts of energy: Although cryptocurrency advocates have argued that renewable sources are also a major component, in reality, much of this energy comes from burning fossil fuels. There are disputes in exact figures, but even the best-case scenarios state that mining is a major factor in carbon dioxide emissions.
"Proof of Work" is the mother of all these problems. Environmental impact aside, right now electricity costs eat into an estimated 28% of Bitcoin mining’s profitability. Also, the added competition is diminishing the profitability.
Epilogue
Provided hardening of the stance of West on Emission requirements combined with eternal air of suspicion on "De-fi" and pressure from environmental activists, the pro-crypto community has to take the moral onus.
As a group of sustainability seekers (with a soft Corner for Technology), we are of the opinion that the upgradation/ modification in the "Proof of Work" concept is the need of the hour. The potential of Blockchain is immense (especially in the Payment sector).
As we have learned from history that any technology or product (be it a wheel or an airplane) undergoes an iterative process of modification till it suits the desired level, the same is true for crypto-technologies as well. Rather than banning it, encouraging, and taking positive steps in formulating new ideas and proposals will be an amicable solution.
Constraints flourish Human Mind for the Greatest Discoveries
- Team Prakriti, IIT Kanpur