Crypto Environmental Challenges
Cryptocurrency is a decentralized digital currency that is created by a process called “mining”. Blockchain is the fundamental building block of the cryptosystem. It is effectively a digital ledger of all verified cryptocurrency transactions. A principal objective of the mining process is to address special challenges of security and double spending of crypto.
What Is Crypto Mining?
Crypto mining is a process that consumes an enormous amount of electrical energy. To be added to the blockchain ledger a transaction must be confirmed and verified. That prevents someone from using the crypto twice.
When a crypto transaction occurs an invitation to verify the transaction (and add it to the blockchain ledger) is broadcast to a community of miners. They compete to see who is first to solve a mathematical problem.
However, the miner is not really solving a problem. Rather he is using sophisticated hardware and software to rapidly run trillions of calculations in minutes until he finds a result that matches a predetermined answer. The first miner to stumble on to it wins the contract and his solution is added to a blockchain.
The most prevalent proof-of-work method of mining is notorious for its consumption of electricity. The US miners’ annual consumption exceeds that of Washington state. Bitcoin and Ethereum which require the proof-of-work algorithm together consume more electricity than Indonesia.
Before China banned crypto mining it had the most crypto miners. Now, most of those exiled miners are coming to the United States. They all require enormous amounts of electricity.
Cryptocurrency, since its inception in 2009, has come under much critical scrutiny. One of the biggest concerns was the consumption of electricity produced by fossil fuels.
The crypto industry is responding. Ethereum is in the process of shifting its platform from the proof-of-work algorithm to the proof-of-stake method that uses much less electrical power.
Miners are positioning their mining equipment near non-fossil sources. For example, they are setting up their mining equipment near wind farms, solar fields, or nuclear power plants.
Crypto issuers are looking for ways to reduce the amount of fossil-fueled power consumption their platform or mining method requires. Their search for non-fossil fuels is encouraging.
Some issuers are changing the algorithm used in their mining method. Chia is a cryptocurrency the mining of which is based not on processing power but rather the amount of hard disk needed and available. They employ the “proof of space and time” method.
Users of the Chia platform are called “farmers”. Farmers install on their unused disk space software that stores cryptographic numbers as “plots” on the disk. When the blockchain broadcasts an order for a block the farmers scan their stored plots to see if they can match the challenge.
While Chia’s platform is eco-friendly it has a mechanical drawback. The stress on hard drives leads to exhaustion of a typical 512GB in 40 days.
Also, the demand for hard drive space is outpacing supply. Price has increased along with a shortage of hard drive space. It will take some time for supply and demand to balance.
Cryptocurrency is presently scrutinized for many reasons. Environmental concerns are a major concern. The industry is taking steps to adjust its practices to respond.