Bitcoin uses more energy than Switzerland, but goverments are cracking down
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One of the biggest downsides of cryptocurrencies is the extensive energy used to create them.
It takes more energy to maintain the whole bitcoin network than to power the entire nation of Switzerland.
This is because of how complicated crypto mining is despite appearing simple in principle. Crypto mining involves validating others’ transactions and adding them to a long list of all transactions.
Because this is spread across thousands of computers, it is costly and energy-hungry.
This has raised eyebrows in the crypto space and the industry has been seeking solutions.
One of the selling points of blockchain technology generally is that it allows perfect consensus between users without involving a third party.
Furthermore, as blockchain Australia board member Karen Cohen explained to Stockhead last month, records cannot be changed.
“With blockchain technology, [a] transaction is recorded and verified in multiple locations, so one party cannot simply change the original record,” she said.
While current technology essentially requires total consensus on behalf of everyone using the blockchain, a paper out of Cornell University earlier this year suggested total consensus may not be necessary.
Co-author Professor Rachid Guerraoui summarised his paper in one sentence: “Basically, we’re saying that you only need to exchange information with a sample of players to implement a cryptocurrency”.
He also said it was “definitely less energy-intensive than bitcoin” and hinted this could be applied to other technologies utilising blockchain.
Another idea is utilising technology that uses less energy.
Earlier this month Incognito, a Californian electronic start up, launched a device (Node) allowing anyone to generate bitcoin for less energy than is required to power a laptop.
It draws just 1.5 kilowatt-hour per day – equating to only 8 US cents per day.
It does this using a type of blockchain, Incognito, which eliminates the need for people to enter lines of code. The physical device is no bigger than a human hand.
It has taken more than a decade since bitcoin’s creation for the problem to start being addressed.
Governments have now started to crack down on the industry’s high energy usage.
In Russia, one nuclear engineer was fined $7,000 for trying to mine bitcoin. Uzbekistan’s government has bought in an energy tax targeting crypto miners.
Meanwhile, the Chinese government has decided to create its cryptocurrency.
While it is unclear if energy consumption is a specific reason why China is doing this, inevitably a government-run crypto would pose a threat to conventional cryptocurrencies, at least in the world’s most populous nation.