There has been lot of talk regarding the energy usage of Bitcoin mining and its potential impact on the environment. Although all other physical stores of value, such as Gold or Oil, also take energy to produce/mine them, it must be noted that the mining of gold and drilling for oil are physical activities while Bitcoin is digital.
Why does Bitcoin mining consume more energy?
Bitcoin was designed to automatically adjust the difficulty of mining to make certain one block is generated every ten minutes, irrespective of available computing power. Therefore, the scarcity of blocks and rise in supply of computing power has led to high difficulty and rising energy usage.
However, there can be several ways to reduce or offset its power consumption and thereby the impact on environment.
Use of cost-effective clean energy
In 2011, Google used energy from fossil fuels to continuously power 200,000 homes. However, soon Google switched to clean energy to be able to offset their entire carbon footprint by 2017.
Similar to Google, Bitcoin mining community could use clean energy sources to power their machines, thereby lessening the impact on environment.
Additionally, a transition to an eco-friendly source is also cost effective, as hydro power to mine Bitcoin is increasingly being used in Vienna (Austria). Austria is a hydro powerhouse with 63 percent electricity being generated using hydropower. The cost advantages stem from low cost of renewable energy sources and easy access for these sources.
Rewards to use renewable energy
The crypto community can make a decision to incentivize miners using renewable sources of energy for mining purposes. This could be programmed in the algorithm or offered as bonus for proof of renewable energy. Perhaps the blockchain can help in identification of energy source.
Switch to Proof of Stake (PoS)
Bitcoin and several other cryptocurrencies use Proof of Work (PoW) mechanism to arrive at a consensus. However, it requires a lot of computing power which is not expected to go down any sooner.
Therefore, Proof of Stake (PoS) is an alternative mining process where validator (equivalent of miner) is picked by the amount of coins (stake) a validator has and the age of validator. The age of validator helps in identifying the commitment and trust with a validator. The validators would earn whole or part of the transaction fee.
In PoS, it is not mining but forging of a block to the blockchain. Ethereum is currently working on a switch to PoS for its blockchain, while Dash uses a hybrid of PoW and PoS.
There can also be a reward for the individual / group that presents a ‘zero carbon using mining’ process, which could be validated by a committee of environmental scientists and crypto experts. The competitions and developer conferences can be a good way of finding a zero-carbon method for cryptocurrency mining purposes. As environment degradation is becoming a major concern for the sustainability of mining operations in the long run, such endeavours will have to be undertaken by the crypto community to ensure development of solutions and mechanisms in this area.