Blockchain platforms and cryptocurrencies are often criticised for their inability to scale and high energy consumption. But there is work being done constantly to alleviate these issues. Developers introduced the Lightning network to Bitcoin to reduce network traffic and speed up transactions by facilitating certain ones to happen off the main blockchain. Ethereum’s answer to the Lightning Network is Raiden. Both of these updates reduce energy consumption.
Regardless of updates like these to the technology, the counter argument to the problem with cryptocurrency energy consumption rests on four main issues:
Bitcoin power consumption is drastically misinterpreted
Not all energy comes from the same sources
Increased energy consumption forces innovation
Current systems are also inefficient
Recent research estimates that mining could account for 0.5 percent of global energy usage by 2018, but these estimations are difficult to make. Not all miners are using the same hardware setup, and a recent article by a researcher at the University of Pittsburgh argues that the sources, not the amount, of energy is ultimately what matters. To show the contrast in opinion between two experts in the related fields on the energy consumption of Bitcoin mining:
“It’s an extreme difference compared to the regular financial system, and this increasing electricity demand is definitely not going to help us reach our climate goals.” - Economist Alex De Vries
“If Bitcoin technology were to mature by more than 100 times its current market size, it would still equal only 2 percent of all energy consumption.” - Electrical and Computer Engineering with focus on Renewable Energy Researcher Katrina Kelly-Pitou:
Shift Focus To The Source
Katrina Kelly, Strategy Manager at the University of Pittsburgh’s Center for Energy, highlights that the conversation should be shifted away from energy-intensivity and towards where that energy is produced and how it is generated, regardless of how much energy is actually being used.
“By talking specifically about ... the consumption of energy alone... many fail to understand one of the most basic benefits of renewable energy systems. Electricity production can increase while still maintaining a minimal impact on the environment....Not all types of energy generation are equal in their impact on the environment, nor does the world uniformly rely on the same types of generation across states and markets.”
Where is it coming from?
China is a world mining superpower due to its cheap electricity supply. But the country uses largely fossil-based sources.
Iceland is becoming a popular spot for BTC miners, where the country relies on almost 100% renewable geothermal and hydropower energy sources.
Because miners are so sensitive to electricity prices, they are often a driver for new technology in the cryptocurrency space, and are constantly pushing to develop renewable sources because they result in the lowest prices.
What About Traditional Banking?
Bitcoin and cryptocurrency mining consumed an estimated 30 terawatt hours in 2017. Yet, the traditional banking industry consumes an estimated 100 terawatts of power each year.
By: BGN Editorial Staff