What is true about the amount of energy consumed when mining cryptocurrencies?

It is impressive how the cryptocurrency mining has increased in recent years, and this is due to the popularity of virtual currency in the market, however, one of the consequences of this process is the high energy consumption .

Cryptocurrency mining

The cryptocurrency is a type of currency that is characterized by having an exclusive presence in the virtual world, that is, it is a currency that does not physically exist; This is used to carry out electronic transactions for the purchase and sale of products and / or services.

Now that we know the definition of cryptocurrency and its usefulness, we can go deeper into the term "cryptocurrency mining", and this is a digital process that is carried out through a consensus algorithm, which allows us to validate the transactions carried out in the blockchain, said procedure receives a reward valued in cryptocurrencies.

The hash puzzle is a mathematical problem that is becoming increasingly difficult to solve in mining, this is what determines the difficulty of mining, in addition, the processing of the network is affected by this complexity.

This is why, previously, a cryptocurrency could be mined through a computer, however, today the equation is much more complex, and requires specialized hardware to execute the mining process.

The expenditure of energy in cryptocurrency mining

To carry out the cryptocurrency mining, it is necessary for a powerful computer to solve complex mathematical operations through specialized software, however, it does not refer to a few computers, but thousands of computers that are turned on day and night , and compete with each other to get the cryptocurrency as a reward.

Additionally, to avoid computers overheating, it is common to use refrigeration equipment, whose function is to maintain a cold environment in the place where computers operate, this significantly influences the consumption of electricity.

Mining farms

The difficulty of mining has been constantly increasing, this has caused the miners to spend much more time to generate a block within the cryptocurrency network, however, to combat this problem, the miners decide to group their technological resources , to generate the blocks faster and obtain the cryptocurrencies as a reward, in this way the mining farms are born.

The group of miners work together to process transactions and create the same block, this implies the connection of a large number of powerful teams that work at the same time, consuming huge amounts of energy in one place.

How much energy does cryptocurrency mining consume?

As the cryptocurrencies increase their value, more computers are connected to run the mining process, and therefore the electricity consumption goes up. The financial entity Morgan Stanley, together with the economist Alex de Vries, estimate that the creation of a cryptocurrency consumes, on average, the same energy as a US home for two years.

Bitcoin mining is one of the largest in the world, and is that an important blog dedicated to cryptocurrencies, estimates that by December 2017, the electricity consumption caused by the Bitcoin mining is 37.1 TWh (terawatts per hour), while a month earlier it was 30.2 TWh, which represents an increase of 22.8%; This figure exceeds energy consumption in countries such as Serbia, Denmark, Ireland and Morocco, and it is expected that this value will continue to rise.

The expense is not yet justified

For those who favor the creation of digital currencies, they argue that energy consumption is a cost that is necessary, since they consider that cryptocurrencies should be adopted as a fundamental pillar for a new financial structure worldwide.

On the other hand, this has brought a whole debate, considering that comparisons are already being made between the large amount of electricity that consumes producing the cryptocurrencies, and the utility that is given to it. In this regard, Satoshi Nakamoto, anonymous creator of Bitcoin, said:

"It is a waste not to use such an amount of energy for the creation of a cryptocurrency, which would be very useful for the world"

On the other hand, in the opinion of Jordan Pearson, journalist of Motherborad and Vice, considers that the utility that is given to the cryptocurrencies nowadays, is not enough base to justify the energetic cost.

Vitalik Buterin's plan to improve the energy efficiency of mining cryptocurrencies

The creator of Ethereum, Vitalik Buterin, is one of the most influential people in the world of cryptocurrency, this has expressed concern about the large amount of energy consumed by cryptocurrency mining, in addition to its effects on global warming; In this sense, it has developed a plan for the mining in Ethereum to be more efficient, from the energy point of view.

Currently, Ethereum and many other digital currencies, including Bitcoin, use the mining system called work test (POW), however, Vitalik believes that the mining system called participation test (POS), consumes much less energy; therefore, it is expected that this year Ethereum will debut a new method of mining, although it is not yet clear, how the change will be made, nor for when.