Background: Crypto Currency Mining

Most cryptocurrencies are characterized by their decentralized control. Instead of being corporate
or government managed, most cryptocurrencies have emerged from grassroots communities. In
general terms, individuals generate cryptocurrencies through using computers to solve puzzles
and then store that information in a blockchain, a (usually) publicly accessible ledger and
decentralized database. As the number of miners competing to unlock Bitcoins increases, the
difficulty of the puzzles simultaneously increases to create a competitive computational race to
prevent inflation and discourage monopolies. To continuously solve the renewing computational
algorithms, mining servers require an immense source of energy. And, if the energy cost of
mining exceeds the profits from the currency gained, there is no incentive to continue mining,
simultaneously undermining the infrastructure that validates its monetary value.
This means that the more powerful the computer, the faster the internet connection, and the
cheaper infrastructural services, such as electricity, the greater the possibility of profiting from
mining cryptocurrency. Mining requires specialized equipment and space to store high speed
servers. The extensive computer power required places large strains on the energy sector with the
machines running continuously.
Environmental Impacts of Crypto Mining
Cryptocurrency mining is dependent on energy sources (e.g., coal-fueled cryptocurrency mines
in Mongolia). However, most crypto-mining occurs in areas with renewable energy sources
because costs are lower.
Depending on the energy source, researchers estimate that crypto-mining can produce 3-15
million tons of global carbon emissions. Big countries like China, heavily rely on coal energy
sources to provide crypto-mining companies with cheap energy prices. However, when
compared to the amount generated by renewable energy sources in Canada, any cryptocurrency
mined in China would generate four times the amount of CO2 emissions.
Based on recent figures, crypto-mining facilities may subsidize the development of renewable
energy resources by seeking the cheapest resource, thus optimizing consumption value.
The profitability of cryptocurrency mining is dependent on the currency’s market value in
concurrence with the price of electricity. If the value of a cryptocurrency depreciates below its
cost of production, mining becomes unprofitable due to large energy expenditure. The most
prosperous crypto-mines are facilities that can operate at the lowest cost by obtaining the
cheapest electricity capable of supporting extreme consumption, supporting enormous
cryptocurrency mining farms across the world with easy access to cheap energy, or access to
surplus energy stores. As a result, miners seek cheap electricity markets while benefiting from
policy environments that do not regulate the ways in which electricity can be consumed.
Solutions for this Energy Problem (Crypto Mining)
Solution 1: Use a different consensus algorithm
The Proof of Authority algorithm is a good alternative to Proof of Work. Proof of Authority
leverages people’s identity. This means that every validating node needs to reveal its real identity
in order to be able to verify new blocks in the network. Moreover, it’s a reputation-based
consensus algorithm that doesn’t rely upon any kind of intensive mining. It’s one of the most
efficient, low-energy consensus algorithms.
Besides Proof of Authority, Proof of Stake is a more well-known consensus algorithm. Proof of
Stake leverages the power of coins in a blockchain ecosystem. By locking tokens, a user can
verify blocks. The more tokens a user locks, the more chances they have to validate blocks.
Again, it’s a low-energy consensus algorithm as little energy is wasted on validating blocks as no
intensive mining process is involved. Any user who has staked tokens can be elected to validate
a block.

Solution 2: Build more energy-efficient blockchains

There are several ways to reach the goal of creating more energy-efficient blockchains. In short,
energy-efficient means that we can send and finalize more transactions with the same energy
usage or less.
Examples:
 Modify existing consensus algorithms to be less energy demanding or use energy-
efficient algorithms like Proof of Authority or Proof of Stake.
 Find new solutions like sharding to make blockchains more efficient and scalable.
 Use more energy-efficient hardware for mining. Differences can be found between older
and newer GPUs that are being used for mining.

Solution 3: Find more sustainable mining solutions

Solar power can be harvested for Bitcoin mining in regions where there is an abundance of the
sun, like Texas. Moreover, Iceland has been a favorable place for many Bitcoin miners. Iceland
offers freezing temperatures that are ideal for cooling your mining rigs. Besides that, Iceland
harvests geothermal and hydroelectric power. This makes energy consumption in Iceland cost-
effective and more “green”. In short, Iceland offers ideal conditions for Bitcoin mining.
Lastly, a hot project called Hotmine appeared in Siberia that used Bitcoin mining rigs as a
heating system for homes. Siberia is famous for its extreme sub-zero temperatures during the
cold winter months. Hotmine’s CEO Oles Slobodenyuk wants to efficiently use the hot air
Bitcoin mining rigs produce to heat homes. It is a noble initiative that might find ground in the
colder regions in Siberia.
References
Mulders, M. (2019). How we can solve the Cryptocurrency Energy Usage Problem. SitePoint.
Retrieved from https://www.sitepoint.com/cryptocurrencies-energy-usage-problems-
solutions/
Samford, H., & Domingo, L. (2019). The Political Geography and Environmental Impacts of
Cryptocurrency Mining. The Henry M. Jackson School of International Studies.
Retrieved from https://jsis.washington.edu/news/the-political-geography-and-
environmental-impacts-of-cryptocurrency-mining/