The recent cryptocurrency price rally has increased the public's interest in this type of asset exponentially. Investors have flocked the markets trying to buy bitcoin and participate in this unmissable opportunity.
This increase in value has made cryptocurrency mining even more popular than before. It has returned this method of passive income to its former glory, making it profitable once again.
However, many critics have expressed their concern about the negative impact of cryptocurrency mining on the environment. As the largest mining farms are situated in countries notorious for their use of electricity based on fossil fuels, this concern seems warranted.
With that said, a lot of effort has been made recently to reduce the carbon footprint of crypto mining. In this article, we explore some of these solutions and the possibility of green mining in the near future.
Let's begin with some basics on cryptocurrency mining for those unfamiliar with the concept.Understanding cryptocurrency mining
In a nutshell, cryptocurrency mining is the backbone of any proof-of-work blockchain, such as Bitcoin or Ethereum. Miners use powerful computers to solve increasingly complicated mathematical problems. Once the problem is solved, a new block of transactions is discovered and added to the blockchain.
Through this process, they provide three essential services to the network users:
Validate transactions - transactions on the blockchain are validated by a consensus reached among all the miners.
Secure the network - miners provide the security layer that makes the blockchain immutable and resistant to change since consensus is required to modify it.
Mint new coins - every discovered block mints new coins, which are rewarded to the miner that has solved the puzzle.
You can see how incredibly essential the mining process is to blockchains. With that said, the computers used to mine cryptocurrencies are extremely power-hungry. Inherently all PoW blockchains require enormous amounts of electricity to continue to run.
For instance, Bitcoin mining consumes as much electricity as a small country and could have a carbon footprint as large as that of London.Is crypto mining bad for the environment?
So, that leaves with the question - is cryptocurrency bad for the environment? Many tend to think that crypto consumes too much electricity for the benefit it provides.
Others, on the other hand, feel that it's a necessary evil in order to provide a decentralized payment network and smart contract functionality to the world.
In either case, it's clear that the largest mining farms are in China, a country that is infamous for using cheap sources of power, such as coal or petrol. More than 85% of mining operations are set up in China and a lot of them are powered by old coal-power plants that were initially constructed for failed industry projects.The solution - Green mining and Terra Pool
First of all, big efforts in China are being made to reduce the reliance on dirty industry for mining. Meanwhile, a UK cryptocurrency company, Argo blockchain, has announced their project to create a Bitcoin mining pool entirely based on green energy.
Working in tandem with cryptocurrency technology firm DMG Blockchain Solutions, a project to create a clean-energy mining pool has been initiated. The two first are launching "Terra Pool", which will exclusively use clean power.
This mining pool will include the hashrates of both companies. At the moment, the power generated to run these mining operations are generated by hydroelectric power plants. The goal is to provide a renewable energy source for bitcoin and other PoW blockchains such as Ethereum.What other solutions we should expect?
The Ethereum blockchain has been heavily criticized lately, due to the increased usage of the network, which is drawing huge amounts of power for transaction validation. The NFT craze, paired with the decentralized finance boom, has turned Ethereum into a power-hungry behemoth as of late.
However, the Ethereum blockchain is in the middle of a switch from PoW to a proof-of-stake consensus. This event, which is expected to happen in 2022, will reduce the power consumption of the network by more than 90%.
Furthermore, PoW blockchains are becoming less and less popular due to their scaling problems. As such, only a few coins will continue to use this consensus mechanism, reducing their carbon footprint in the long run.Closing thoughts
Cryptocurrency mining requires enormous amounts of electricity and remains a vital part of the entire transaction and minting process. With an increased interest in shifting toward cleaner energy, we could see green mining become a reality sooner rather than later.
While price of Bitcoin may reflect on the environment, there's a clear trend of mining farms opting for renewable energy. Climate-friendly operations such as the Terra Pool will become the norm and in the long run, Bitcoin mining should have a lesser impact on the environment.