Sustainability of Cryptocurrency Mining

By: Amanda Gulli

When you envision the word mining, you assume extracting some metal or mineral from the Earth. However, this is 2018 and the new mining extracts bitcoins from the internet.

  1. What is a bitcoin?

Since its inception in 2008 by a mysterious author named Satoshi Nakamoto, Bitcoin has catapulted the financial industry into a new realm of digital currency.[1] This digital currency uses a decentralized public ledger that records all information known as blockchain.[2] Blockchain is not controlled by any single institution but instead maintained by its anonymous users.[3] To use blockchain, a user must have a “node” which is a computer that runs the bitcoin software.[4] Furthermore, some nodes are “miners” which collect unresolved transactions into blocks adding them to the blockchain.[5]

  1. What is mining?

The process which verifies and adds transactions to the blockchain is called mining.[6] Each time a miner adds a new block to the blockchain she is rewarded with bitcoins.[7] To add a block, a user must compose new transactions and then decipher a problematic mathematical puzzle.[8] The difficulty of the puzzles varies on the number of miners in the network.[9] The more miners, the more difficult the computational puzzles are.[10] The network adjusts the difficulty because it wants to keep the rate of new blocks constant.[11] Not only does mining incentivize users, it also acts as the sole function in the bitcoin operation that “enables the currency to be safely and predictably created without” a centralized system.[12]

  • Mining a pollutant?

Bitcoin is contributing to global warming because it takes an astonishing amount of electricity to mine.[13] It is estimated that the bitcoin network total energy usage per year is 31 terawatt-hours per year which is more than what 150 countries produce annually.[14] For more perspective, Visa estimated energy use is equivalent of 50,000 US households to perform 350 million transaction, whereas bitcoin’s 350,000 transactions energy equivalent is 2.8 million US households.[15] Industry experts estimate that by 2019 the bitcoin network will need more electricity than the entire United States. [16] Bitcoin is on a trajectory that is not only unsustainable but also dangerous to the world.

  1. Crypto-governance

As governments try to regulate cryptocurrency through policy and legislation, they must also attach environmental standards. Certain restrictions can incentivize bitcoin to create a more innovative system that is environmentally stable. Environmentalist Guillaume Chapron suggests lawyers need to develop “smart contracts” that are established in the blockchain network’s code instead of language making it accessible all over the world.[17] Additionally, smart contracts would set up independent digital entities within blockchain to manage and guarantee that the energy being used is clean. [18]

[1] Noelle Acheson, What is Bitcoin?, CoinDesk (Jan. 26, 2018), https://www.coindesk.com/information/what-is-bitcoin/ (last visited Sept. 26, 2018)

[2] Id.

[3] Id.

[4] Noelle Acheson, How Bitcoin Mining Works, CoinDesk (Jan. 29, 2018), https://www.coindesk.com/information/how-bitcoin-mining-works/ (last visited Sept. 26, 2018)

[5] Id.

[6] Bitcoin Mining, Investopedia, https://www.investopedia.com/terms/b/bitcoin-mining.asp (last visited on Sept. 26, 2018)

[7] Id.

[8] Id.

[9] Id.

[10] Id.

[11] Id.

[12] Bitcoin Mining, supra note 6.

[13] Eric Holthaus, Bitcoin Mining Guzzles Energy and Its Carbon Footprint Just Keeps Growing, Wired, (Dec. 6, 2017), https://www.wired.com/story/bitcoin-mining-guzzles-energyand-its-carbon-footprint-just-keeps-growing/ (last visited Sept. 26, 2018)

[14] Id.

[15] Nicole Kobie, How Much Energy Does Bitcoin Really Use, (Dec. 2, 2017), https://www.wired.co.uk/article/how-much-energy-does-bitcoin-mining-really-use (last visited Sept. 26, 2018)

[16] Holthaus, supra note 13.

[17] Guillaume Chapron, The Environment Needs Cryptogovernance, Nature, (May 22, 2017) https://www.nature.com/news/the-environment-needs-cryptogovernance-1.22023 (last visited Sept. 26, 2018)

[18] Id.

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