Is mining cryptocurrency harmful for the environment? Our resident technologist was asked to evaluate this new landscape.
Two hot words in the financial and corporate worlds today are cryptocurrencies ESGAre they interrelated? Are cryptocurrencies more environmentally friendly than a threat to climate targets as set out at the recent United Nations Conference of the Parties 26 (COP26)?
We spoke with Joseph Raczynski (Thomson Reuters resident Technologist & Futurist, and early adopter) about crypto-mining and the environmental cost and future sustainability.
Thomson Reuters Institute What is crypto-mining in its most basic form?
Joseph Raczynski:The traditional act for mining cryptocurrency is driven heavily by heavy computer processing power. This is because processors race to solve mathematical problems first so that the sole winner may add a group of transactions to blockchain. A transaction could be a person sending money via Bitcoin to another person.
The processor is working hard, which you can feel when your machine warms up. The act of mining rewards the first or most group of computers that solves the mathematical puzzle using the cryptocurrency’s native token. In the Bitcoin example above, more than 100,000 nodes (computer clusters) are competing to win. If they win, they receive 6.25 Bitcoin (valued around $237,000.500) for the ability of adding the grouping transaction to the next block on a chain. This happens approximately every 10 minutes.
A reduction in reward over time is baked into the code. Additionally, there is a fixed supply Bitcoin that will not be reduced. everExist, so mining becomes more difficult as the number of computers competing at any given time. This is called “The Mining Process”. Evidence of workIt is also very energy-intensive. While another form of mining consensus is Evidence of stakeAnd it is far more efficient.
Thomson Reuters Institute How much does the environment cost by cryptocurrency?
Joseph Raczynski:This is a complicated and divisive topic. Since 2011, I have been involved in this space and can see both sides of it. I believe I can also distill its reality. Evidence of workThis is a natively inefficient device, as it consumes a lot of electricity to solve the mathematical problem and win the reward. This is not sustainable.
Crypto-miners are interested in being as efficient as possible. After the hardware investment in fast computers and processors (also known as mining rigs), their main expense is energy. Miners search for the cheapest locations to plug their devices into the electric grid. They are interested in renewables like wind, solar, and hydro power. They have also used the natural gas blow-off, which would have been lost, or burned as waste.
While clean energy is becoming more sought after, not all crypto-miners are doing so. There is no doubt that cryptocurrency mining is a lucrative business. Evidence of workIt is a cost to the environment, but not as severe as some believe. It is possible to align your energy consumption and environmental impact with cryptocurrency’s benefits through a vast new industry. This intangible effect is, of course. 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 of crypto-miners possibly be reduced in any way?
Joseph Raczynski: Another interesting 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. couldBlockchain could be used to replace them. The move to blockchain could reduce all of the environmental and physical effects of these institutions. Consider the energy used to build and operate office buildings, the number of workers who travel, the gas and oil used, and all other combinations that have an impact on the environment. The underlining technology that would serve this purpose would reduce that impact. Ultimately, Evidence of stakeThis environmental problem can be solved, but Evidence of workIt 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 proof-of-stake to be?More sustainable?
Joseph Raczynski:There is great news. It solves the electricity problem, and, in turn, the environment problem. The main blockchains, Ethereum and Solana, Avalanche and Cosmos, are the future of the industry. Evidence of stake, which relies on a different mechanism for adding transactions to the digital ledger. There are many types of Evidence 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, click here. These users want to make anywhere from 7% to 1,000% from the money they stake. They lock it into a smart agreement that increases the resilience of the network. The incentive is that the more money people stake, the greater network effect and security.
These high interest rates could drive tens or billions of dollars to staking. The code determines who gets to save the most recent batches of transactions to 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. SlashedThat means you stakeCould be confiscated Evidence of stakeThis is expected to reduce the electrical use of crypto-mining by well beyond 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 actually contributing to climate change
Joseph Raczynski:If Evidence of workContinued with Ethereum. This is the most widely used blockchain in the globe. Crypto-mining could have had a negative effect on climate change over the long-term. The upgrade to Ethereum 2.0 (ETH2) was completed on a Evidence of stakeThis will be drastically changed by model
