Mining and cryptocurrencies must use less (and renewable) energy

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The mining system of cryptocurrencies is responsible for 0.6% of the world’s energy consumption. The renewable example of Trentino.

In 2021, the annual electricity needs required by Bitcoin production accounted for 0.6 percent of world production The environmental impact of cryptocurrency production has become a “national issue” for Sweden The European Union would like ban the most energy-intensive activities related to the creation of cryptocurrencies

The production of digital coinscommonly called cryptocurrenciesrequires too much electricity. For this reason, the European Union wants to take action for regulate mining activitiesthat is, of “extraction” (creation) of this type of currency. The announcement was made in an interview with the Financial Times by the vice president of the European Financial Instruments and Markets Authority (Esma), Erik Thedéen.

The latter has called for a change of the activities through which digital currencies are extracted. A problem that is becoming more and more important, so much so that it has become a “matter of national importance” in various parts of the world, for example in Sweden, the country from which Thedéen himself comes.

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Criptovalute e bitcoin

How cryptocurrency mining works

The technology behind cryptocurrencies it is known as the blockchain. The literal tradition is “blockchain”: this is the ledger (ledger) on which all transactions carried out with a digital currency are noted. This register is shared among all those who contribute to generating cryptocurrencies (the so-called miners) through digital mining. Miners must abide by a protocol of rules. At the basis of the protocol in question there is a “consensus algorithm”: the first to be created and used, especially by Bitcoin, was the so-called proof of work.

It is a system that is based on the solving mathematical problems very complex on the part of the miner network. In practice, very powerful computers try to solve the problem in order to modify or add a block to the blockchain and receive a reward (in cryptocurrency, of course) for the work done. Therefore, the greater the computing power, the greater the chances of solving the problem first and thus earning the reward.

Over the years, miners have been trying to increase the computing power more and more to win more and more cryptocurrencies, with the consequence that the difficulty of the proposed problems has increased exponentially. As well as the computational power required. The birth of mining farms (or mining pool): authentic “factories” dedicated to the extraction of cryptocurrency made up of thousands of computers on the network. Which he did enormously increase the requirement energy of these operations.

Cryptocurrencies consumed 0.6 percent of the world’s energy in 2021

Il annual consumption of Bitcoin alone may have been 129 terawatt hours in 2021, according to estimates by the Cambridge bitcoin electricity consumption index (Cbeci). Let’s talk about the 0.6 percent of world electricity generation, equal to the absorption of a nation like Norway. To have a term of comparison, in 2019 a digital giant like Google had consumed “only” 12.2 terawatt hours.

“Bitcoin mining is now a national issue for Sweden due to the amount of renewable energy devoted to its extraction,” Thedéen said. “Would be absurd if wind energy generated on the long Swedish coast was used to generate cryptocurrency, ”he added.

Un hardware per il mining di bitcoin © Andrew Burton/Getty Images

Mining, bitcoins are extracted from renewable energy in Trentino

For these reasons, bitcoin mining is being considered a little ecological operation. Also because the second largest extraction center in the world (after China) is Kazakhstan, which bases the production of electricity largely on carbone. That is the most damaging fossil source for the climate.

However, there are also examples of “bitcoin factories” powered by renewable energy. In Trentino Alto Adige, for example, more and more cryptocurrency mining plants are springing up, reviving old hydroelectric plants. In Borgo d’Anaunia, a town of 2,500 inhabitants in the Val di Nona hydroelectric power plant from 1925 will be used to provide clean energy to a new mining plant for the extraction of bitcoins.

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Protests in Almaty, Kazakhstan

The priority is to change the “proof of work”

Regardless of how it is produced, whether from fossil fuels or renewable energy, cryptocurrency production poses a supply problem – it makes sense to use so much energy for this purpose? The proposal of the vice president of ESMA is to move from a proof of work mechanism to a more sustainable systemknown as proof of stakealready experienced by other cryptocurrencies alternatives to Bitcoin, such as Ethereum, Nxt, Peercoin. In this case, the process by which computers compete with each other to solve complex mathematical problems, i.e. mining, is replaced by a system in which the so-called validators guarantee the validity of the operations carried out on the blockchain. by pledging a share of their own cryptocurrencies (precisely the “stakes”).

In short, anyone who wants to apply to become a validator must deposit a share of their cryptocurrencies within the network, engaging it as a sort of guarantee or security deposit. Once a node is selected as validator (the choice is made randomly) of the next block, it will have to check if the transactions contained in it are valid, sign the block and add it to the blockchain.

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Representation of Bitcoins

Since proof of stake does not require extra energy to prove reliability, it is much more energy efficient. Unlike proof of work, where supercomputers are needed, proof of stake it can be done from a single laptop. The nodes of the network, the validators, are virtual spaces, not physical devices, which could reduce by 99.9 percent the impact, Ethereum reported. However, several experts criticize proof of stake, considering it a less secure method. The fact that it costs next to nothing to become a validator can also attract impostors and cyber criminals. For this, several cryptocurrencies are working on more sophisticated algorithms to attribute the role of validators, demonstrating that proof of stake is becoming a matter of interest for several developers. A good outlook for the future of cryptocurrencies and theirs impact on the environment.

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