Is mining cryptocurrency harmful to the environment? This is what our resident technologist assessed when we asked him to evaluate the emerging landscape.
Two words that are hot in today’s corporate and financial worlds are cryptocurrencies ESG (environmental, social, and corporate governance issues) — yet, are the two intertwined? Is cryptocurrency an environmentally friendly option or a threat to climate targets as outlined at the recent conference? United Nations Conference of the Parties (COP26)?
We spoke with Joseph Raczynski, Thomson Reuters’ resident Technologist & Futurist and early adopter of cryptocurrency, about crypto-mining, the cost to the environment, and its sustainability going forward.
Thomson Reuters Institute What is crypto-mining in its most basic form?
Joseph Raczynski:Mining cryptocurrency is a traditional activity that relies on heavy computer processing power. Processors race to solve a mathematical problem the fastest so that the sole winner can add transactions to the blockchain. A transaction could be a person sending money via Bitcoin to another person.
Computer processing power — which you can tangibly feel as your machine gets warm — means the processor is working very hard to do something. The act of mining financially rewards the first computer, or grouping of pooled computers, that solve the mathematical puzzle with that cryptocurrency’s native token. In the Bitcoin example, over 100,000 nodes (computer groups) around the world are competing for the win. If they win, they will receive 6.25 Bitcoin (currently valued at $237,500). This allows them to add the grouping transactions to the next block of the chain. This happens approximately every 10 minutes.
The code includes a reduction in the reward over time. There is also a fixed supply bitcoin that will be available. everMining is difficult because of the limited number of computers available. This is called “The Mining Process”. Do you have proof of work?It is also very energy-intensive. While another form of mining consensus is Demonstration of stakeAnd it is far more efficient.
Thomson Reuters Institute How much does cryptocurrency affect the environment?
Joseph Raczynski:This is a complex and politically divisive topic. I’ve been in this space since 2011 and I can see both sides. I believe I can help you to understand the reality. Do you have proof of work?This is a natively inefficient device, as it consumes a lot of electricity to solve the mathematical problem and win the reward. This is not an environmentally sound product.
However, crypto-miners’ intrinsic interest lies in being electrically efficient because energy consumption is their primary expense after the hardware investment in fast processors and processors. These are also known as mining rigs. The miners look for the best places to plug their rigs into an electrical grid. They pursue renewables — solar, wind, and hydro power — and have used the blow-off captured from natural gas, which would have been lost or burned as waste.
While the search for clean energy is on the rise, not all crypto miners are doing it. There is no doubt that cryptocurrency mining is a lucrative business. Do you have proof of work?Although it can be a problem for the environment, it is not as serious as some might think. The intangible benefit of cryptocurrency is that it aligns energy consumption and environmental impacts with the benefits that it has created through a vast industry. The technology has created a web of value that all of us can use, so there is a cost-benefit that is also being achieved.
Thomson Reuters Institute Could the impact on crypto-miners be diminished in any way
Joseph Raczynski: Another fascinating argument regarding the environmental impact of crypto-miners is that they are essentially the new intermediary. Each of these businesses can be used for any transaction, whether it’s legal, financial, insurance, supply chain or other types of business. couldA blockchain could replace it. The move to blockchain could eliminate all the environmental and physical impacts of these institutions. Think of the electricity used to build and run office buildings, the workers who travel, gas and oil used, materials needed, and all other combinations of energy and environmental impact that any such institution has on the environment — that would be reduced with the underlining technology that would serve its purpose. Ultimately, Demonstration of stakeThis environmental problem can be solved, but Do you have proof of work?It is something that will continue to exist, even in a declining form.
Thomson Reuters Institute Ethereum, a cryptocurrency, stated that it plans to reduce its energy consumption by almost 100 percent this year by switching to a proof-of-stake process. How can cryptocurrencies use proofof stake to beMore sustainable?
Joseph Raczynski:There is some great news that will solve the electricity problem and the environmental problem. The main blockchains, Ethereum and Solana, Avalanche and Cosmos, are the future of the industry. Demonstration of stake, which relies on a different mechanism for adding transactions to the digital ledger. There are many varieties of Demonstration of stakeHowever, if someone wants to participate in crypto-mining, they will not be using their processing power to win a mathematical race. Instead, each person invests money or a stakeTo participate. These users hope to earn anywhere between 7% and 1,000% on the money they stake by locking it in a smart contract that strengthens the resilience of the network. The incentive is that the more money people stake, the greater network effect and security.
The potential for these high interest rates to drive tens or billions of dollars into staking is driving them to invest. The code decides who is allowed to save the latest transactions to the blockchain. If you are a bad actor, it is disincentive to try to change or upend a block. For example, you can save information to the ledger. You can get disqualified for trying to disrupt the network. SlashedThis means that you stakeCould be confiscated The proof of stakeIt is expected that this will reduce the electrical consumption of crypto mining by well above 99%. This upgrade of Ethereum to the latest version should take place in 2022. It will also reduce the environmental impact.
Thomson Reuters Institute Are mining and trading with cryptocurrencies really contributing to climate changes?
Joseph Raczynski:If Do you have proof of work?Continued with Ethereum, the most-used blockchain in the world. If so, then crypto-mining could have had an adverse impact on climate change. The upgrade to Ethereum 2.0 (ETH2) was completed on a Demonstration of stakeThis will be drastically changed by model
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