The challenges faced by cryptocurrencies
Cryptocurrencies then and now
Cryptocurrencies are very dynamic. If we compare the way they are now from when they started, we will see that they were not recognized before. What once was viewed as a tool for criminals and speculators has made a name for itself. Today, digital currencies like cryptocurrencies are a legitimate space. Let us look at bitcoin and ether. More and more people are getting interested. The price is increasing every day. However, we cannot eliminate the doubts of people about cryptocurrency. Some people raised several concerns like cryptocurrency mining and the energy consumption that comes along with it. This worsens climate change because it contributes to more carbon emissions.
How did cryptocurrency get involved with mining and carbon emissions if it is digital?
Proof-of-work blockchains are naturally competitive. Hence, they produce energy costs. Cryptocurrency has a separate network of miners which store all the transaction records instead of a central database that stores account balances. These miners get block reward incentives. Who are these miners? Miners are specialized computers. They race to record new blocks, and these blocks are made by solving cryptographic puzzles. People who support cryptocurrencies believe that people benefit from the system compared to traditional and centralized currencies. Cryptocurrency does not depend on any intermediary. But the issue that it faces is the mining requirement of puzzles. It needs massive computers that are energy intensive.
Cryptocurrency and environmental concerns
Environmentalists are concerned about cryptocurrency mining. It becomes less and less efficient as cryptocurrency's price hikes. For example, Bitcoin's mathematical puzzles that create blocks become more complex as the price increases. On the other hand, the transaction remains the same. Hence, the network will need more computer power and energy in the long run to process the same amount of transactions.
Cryptocurrency supporters back up mining.
Supporters try to defend mining. They say that mining operations focus more on areas that have surplus renewable energy. They are claiming this because the miners do not stay in one place for an extended period. They can always move to find another place with surplus energy. There are Chinese mining firms that move from one place to another to seek the cheapest energy. So, it means that they support cheap and renewable providers in specific locations. However, bitcoin remains controversial when it comes to its renewable energy usage. Even their best renewable energy usage estimates show that it is a net contributor to carbon emissions. While there is word going around that some proof-of-stake blockchains like EOS and Cardano do not use mining anymore, cryptocurrencies are also linked with another issue which is fossil fuels.
What can we say?
Do we know that
cryptocurrencies use a massive amount of energy from burning coal and other
fossil fuels? Some supporters may argue that a significant component includes
renewable sources. It is either you are a supporter or a detractor. There is no
way to know the exact amount of energy or pollution that cryptocurrency
contributes. But we are sure that mining is a significant contributor to CO2
emissions, and it needs to be addressed and fixed.
