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A lot of energy and money comes from these mining platforms.
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Tesla CEO and cryptocurrency cheerleader Elon Musk rocked the crypto market when he said his company would no longer accept Bitcoin for vehicle purchases. In a May 13 tweet, Musk referred to an increase in the use of coal and other fossil fuels to generate electricity used for mining as the reason for his decision. The fallout from the tweet: Bitcoin’s price fell 14%.
Bitcoin, Ethereum, Dogecoin, and other popular cryptos have hit all-time highs this year, raising concerns about the amount of energy needed to mine the coins. Bitcoin mining rig warehouses operate around the clock, consuming more power than the whole of Argentina. As the energy bill for crypto mining rises, so does the amount of carbon and waste, further compounding the growing climate crisis.
To be clear, I strongly believe in crypto, but it cannot lead to a massive increase in the use of fossil fuels, especially coal.
Elon Musk (@elonmusk) May 13, 2021 Editor’s Top Picks
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Here’s what you need to know about crypto mining and its energy uses.
What is crypto mining?
When Bitcoins are traded, computers around the world race to perform a calculation that creates a 64-digit hexadecimal number, or hash, for that Bitcoin. This hash goes into a public ledger so that anyone can confirm that the transaction for that particular Bitcoin has occurred. The computer that solves the calculation first receives a reward of 6.2 bitcoins, or about $ 225,000 at current prices.
Other cryptocurrencies use similar mining technologies, contributing to overall energy consumption.
What is a mining platform?
It’s a barebones computer with multiple graphics cards, or GPUs, instead of the standard single card. The platforms typically use powerful GPUs from Nvidia and AMD to handle the computations and require high power power supplies. The popularity of mining has led to a shortage of graphics cards.
A crypto mining farm in Nadvoitsy, Russia.
Getty Images Why is mining so energy intensive?
For starters, graphics cards on mining rigs run 24 hours a day. It takes a lot more power than surfing the internet. A platform with three GPUs can consume 1000 watts of power or more when running, the equivalent of having a mid-size window AC unit turned on.
Crypto mining companies can have hundreds or even thousands of platforms in one place. A mining center in Kazakhstan is equipped to operate 50,000 mining platforms.
Platforms not only consume energy, but they also generate heat. The more platforms you have, the hotter it gets. If you don’t want your rigs to melt, you need some cooling. Many mining rigs have multiple built-in computer fans. But if you have multiple platforms, the room quickly gets hot, requiring external cooling. Small operations, like those run by individuals, can get by with a typical standing fan. Mining centers, however, need a lot more cooling, which in turn requires even more electricity.
How much energy does it take?
The Digiconomist Bitcoin Energy Consumption Index estimated that a Bitcoin transaction requires 1,544 kWh, which is the equivalent of about 53 days of electricity for the average American household.
To put it in monetary terms, the average cost per kWh in the United States is 13 cents. This means that a Bitcoin transaction would generate over $ 200 in energy bills.
Bitcoin mining used more energy than Argentina, according to a University of Cambridge analysis in February. At 121.36 terawatt hours, crypto mining would be in the top 30 countries in terms of energy consumption.
A wall of mining platforms in Quebec, Canada.
Getty Images Why is consuming so much energy bad for the environment?
Fossil fuels represent over 60% of energy sources in the United States. A majority of this percentage is natural gas and a minority is coal. Carbon dioxide produced by fossil fuels is released into the atmosphere, where it absorbs heat from the sun and causes the greenhouse effect.
As mining platforms consume more energy, nearby power plants must generate more electricity to compensate, which increases the likelihood that more fossil fuels will be used. States with struggling coal-fired power plants, like Montana, New York, and Kentucky, are trying to profit by courting crypto mining companies.
What do we do about this problem?
Not a lot. The 3rd Global Cryptoassets Benchmarking Study from the University of Cambridge found that 70% of miners based their decision on which coin to mine on the amount of the daily reward. Energy consumption was only 30% of their choice.
Access to low-cost renewables is attracting crypto miners, however. China’s Sichuan Province has the second largest number of miners in the country due to its abundance of cheap hydroelectric power. Its rainy season helps generate so much energy that cities are looking for blockchain companies to relocate in order to avoid wasting energy.
The operators of Ethereum, the second most popular blockchain behind Bitcoin, are doing something to change the amount of energy consumed by its miners. Ethereum 2.0 is an upgrade that will be completed sometime this year or 2022. Instead of computers trying to solve calculations – called proof of work – computers will be randomly selected to create blocks for the blockchain, while computers that were not selected will validate the blocks created.
To make sure the miners are doing their job, each miner must wager 32 Ethereum coins, also known as Ether, which equates to $ 85,000, hence the term for this protocol is called proof of stake. This change reduces the amount of energy required to mine Ethereum.
What other cryptocurrencies are more energy efficient than Bitcoin?
A growing number of coins – there are over 10,000 of them – are using the proof-of-stake protocol that Ethereum 2.0 will move to, resulting in lower power consumption.
Cardano, for example, uses its own proof-of-stake protocol and consumes 6 gigawatt hours per year. To put this in perspective, Cardano’s energy consumption is one and a half GWh less to supply enough electricity to Niue, a South Pacific island nation, with its population of 1,620 people, for a year. For comparison, Bitcoin uses 126.09 terawatt hours per year, which is equivalent to the amount of energy Pakistan, with its population of 225 million, uses each year.
Following Musk’s May 13 tweet, Cardano hit records as it was seen as an environmentally friendly alternative to Bitcoin. Its price peaked at $ 2.47 on May 16, but its value has plummeted and currently stands at $ 1.57.
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