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Bitcoins are immensely popular and also the earliest known cryptocurrency in the world. Since its introduction, it's been experiencing a surge in Bitcoin users globally; today, there are around 45 million Bitcoin users across the globe. In fact, some countries like El Salvador have issued bills to legalize the use of Bitcoins and other cryptocurrencies as legal tender. Moreover, many countries are emerging as hubs for the development of blockchain-based companies.
On the one hand, Bitcoins are disrupting multiple sectors, especially the financial industry, by providing cheaper and faster everyday transactions. On the other hand, its energy consumption is becoming a serious matter among the crypto community as well as global environmentalist organizations and leaders.
In such a scenario, some are suggesting using solar energy to fuel Bitcoin transactions, which seems like an appropriate solution. However, a well-researched report on solar energy use isn't available yet.
Hence, in this article, we will learn about Bitcoin, its effects on energy, and the possibilities of the use of solar energy for Bitcoin.
What Is Bitcoin?
In January 2009, the first digital currency named Bitcoin was launched. Interestingly, the original creator of Bitcoin is unknown; however, its concept was found in a whitepaper prepared by a mysterious person named "Satoshi Nakamoto." Though the mystery of its creator or creators still lingers today, the concept found was well-detailed that helped developers to produce the technology behind Bitcoin: "Blockchain."
Blockchain runs Bitcoin transactions at a much lower fee compared to any other online money transfer mechanisms available today. In addition to this, Bitcoin does not need any central governing authority to run transactions. Instead, a decentralized system operates it.
Bitcoins do not have any physical existence but can be used to buy and sell real-life properties and other items as well. They are basically transparent storage of digital currencies on a public LEDGER whose public data can be accessed by everyone on the network.
As Bitcoin is not supervised by third parties, governments, or banks, verification for transactions is carried out by computing complex equations for each Bitcoin transaction.
Though Bitcoin is not accepted as a legal tender in the majority of countries across the world, it significantly influenced the creation of thousands of other cryptocurrencies. These crypto coins are called altcoins which stand for alternate currencies or every cryptocurrency but Bitcoin.
Understanding the working mechanism of Bitcoin
As mentioned earlier, Bitcoin executes on the blockchain, a distributed digital record. As per the description available on the blockchain, it is a database that comprises piles of digital data in the form of blocks. These blocks contain data of every transaction that takes place on its network. The data will usually fetch the date and time of the transaction, addresses of sender and receiver, and a unique identification code known as "hash" for each transaction. These data are stored in chronological order in the network; thus, a chain of blocks is created, hence the name "Blockchain."
What makes the Bitcoin transaction different from traditional transactions is that once a transaction is documented within a block, then there is no way anyone can change it. If someone wants to update some data on a recorded block, then they will need the consensus of every member of the network. As blocks recorded on the network are easily accessible to members, if it contains any error, it will be immediately detected by the network members, and a consensus can be run to resolve the issue.
While the fact that anyone can get access to transaction data sounds sensitive, it is the factor that makes Bitcoin transactions safer and trustworthy.
For adding a new block or making changes in the existing one, again, verification by each member is a must, and the hash code that defines a unique user's wallet comprises long and complex strings of numbers and characters. These codes are specifically generated to prevent any fraudulent activities. Also, due to the complexity of hash codes, it becomes daunting for an attacker or fraudster to discover the exact combination of characters and numbers. Hence, we can say that the level of security provided by blockchain technology is extremely high. Moreover, to double down the security, blockchain also uses a proof-of-work mechanism that significantly makes string complexity much more tough to compute
Bitcoin Mining
Bitcoin mining is defined as the process of creating new Bitcoins as well as it also streamlines the improvement and maintenance of the blockchain ledger. The mining is done by using supercomputers that are capable of solving complex mathematical equations. Bitcoin mining is highly appealing to most crypto investors as it can be used to earn remarkable revenue. When a miner solves an equation for a new transaction, he gets a collective reward from the crypto community for offering his work.
In Fact, most crypto investors are moving towards Bitcoin mining in the hope of earning a good chunk of money. Crypto enthusiasts deem that Bitcoin trading and mining is a way to gain financial freedom in today's world of digitalization.
Though you have to make a significant investment and buy the most updated computers to become a miner, the rewards you'll receive will be five times bigger.
Also, you will need to maintain your high-power computers, which consume a significant amount of energy( which is a huge concern today). So, make sure you are financially and mentally prepared to take this job. "Mentally prepared" because this field is highly competitive due to the amount of rewards it offers for just a single computation.
Apart from Bitcoin mining, there are other ways to earn income from Bitcoins, such as:
- You can buy a few Bitcoins when their price is reasonable; then, later, you can make a profitable trade from them when the price reaches its peak. Due to the volatility of cryptocurrencies, getting the opportunity to find great deals on their sales is more easy. Moreover, holding a Bitcoin when the market is low won't cause any harm to you.
- Another method is becoming an investor in the mining pool; you have to fund a particular pool along with other investors and earn rewards each time other users make a trade using your funds within the network.
Till here, we discussed all the good things about Bitcoins: but does the question of where these 24/7 non-stop running supercomputers get the electricity pop up in your mind? If yes, then keep reading further to learn the not-so-good aspect of Bitcoin existence.
Why does Bitcoin mining consume so much energy?
For an outsider who is not familiar with the work behind Bitcoin transactions, learning the tremendous amount of electricity they use would be a total surprise. After all, users just need to click on the buy and sell options using a crypto trading app for making a transaction.
Moreover, it resembles all the other existing digital networks that we have been using for years now for transferring money, such as net banking, mobile payment apps, PayPal, and so forth.
But in the case of Bitcoin, the use of a decentralized framework releases a considerable amount of carbon footprint. This is because for solving complex math equations to streamline Bitcoin transactions, supercomputers need enormous energy. Furthermore, to implement proof-of-work, a more extensive energy source is needed as with every new transaction, it toughens the already complex equation. Hence supercomputers consume even more energy to solve it at a fast rate.
In addition to this, there is a constant race among all the miners within the platform to be the earliest one to solve the equation to receive maximum rewards. Only the computer that solves the problem first is liable to certify the transaction. It gives the owner of the computer the benefit of earning a few valuable Bitcoins.
Initially, when Bitcoin first started operating, the process of equation solving was much easier and didn't consume a hefty amount of electricity. But, with the increases in its user base, the math equation is evolving to be harder to solve. Hence, automatically energy consumption is rising day by day.
Moreover, to match the needs of Bitcoin mining, today, big companies are producing more advanced and updated computers, known as rigs. With being exceptionally fast and efficient, these modern supercomputers are also big consumers of electricity.
Analysis of energy consumption in Bitcoin mining in different aspects
Let us now discuss about the consumption of energy while mining bitcoins. This will help analyze the real-life state of the situation and that it is really bad or not.
In terms of Electricity
From the data obtained from Cambridge Bitcoin Electricity Consumption Index, the Bitcoin platform consumes around 133.68 TWh annually. This amount is equal to a small countries' yearly electricity consumption like Sweden (131.80TWh), Ukraine (128.81 TWh), or Poland (152.57TWh). And, this data is concerning for global environmental health. Furthermore, if we compare it to some other digital money transaction system such as visa, then still a single Bitcoin transaction surpasses electricity usage with 1200.86 KWh where visa consumes merely 148.63 KWh for 100,000 transactions on average.
In terms of Carbon Footprint
As per data gained from Digiconomist, for performing just one Bitcoin transaction, a carbon footprint of approximately 594.74 kgCO2 is released, which is equal to streaming youtube for a total of 91,624 hours.
Hence, by looking at these data, there is no question that Bitcoin is directly affecting our environment in a bad way. However, this is mainly because Bitcoin mining and transactions are solely dependent on fossil fuels for electricity generation. Crypto experts say that if we bring a renewable energy source to back Bitcoin processes, we can enjoy this futuristic technology without harming the climate.
Hence, discussions on the solar power-led blockchain framework have been going on among the community.
What can solar energy do for Bitcoin processes?
Maintaining the balance between fast crypto processes and their energy use is probably the most challenging part of the entire system. More importantly, attempting to conserve the environment at the same time is substantial. As the Bitcoin sphere is continuously expanding, it is apparent that additional energy will be needed to keep the blockchain technology up-to-date as well as create new unique codes efficiently.
By looking at the situation, we can deem that renewable energy sources are a must to tackle energy issues. Solar energy seems to be the perfect option for this purpose. Solar energy is readily available and is, of course, permanent. Hence, it is the most practical solution to fuel Bitcoin processes continuously without wasting carbon-based fuels anymore.
Surprisingly, the idea of implementing a solar-led Bitcoin platform is not new. In Fact, the concept was well appreciated in 2017. However, only a few mining firms adopted the solar system in their proceedings. But, today, as the climate impact of cryptocurrencies is coming more to the surface, more companies are showing interest in renewable energy sources. A solar-led Bitcoin system can satisfy the two aspects of the best blockchain framework: More frequent hash creation and less energy wastage of non-renewable energy. Solar energy for Bitcoin is a suitable approach to achieve that, plus it makes much better sense in terms of cost-effective investment. In the regions with good insolation, solar plants can offer enormous energy with minimal price as well as the construction cost would be low too. Plus, due to no fuel expenses with solar plants, automatically, it will eliminate volatility too.
Conclusion
The developers of Bitcoin have an aim to make it a part of the mainstream financial framework. To achieve this, Bitcoin needs to pass the criteria of being a sustainable payment system. Though the environment is concerned due to Bitcoin, it won't be fair to avoid the benefits and convenience it brings to people in terms of finances. Hence, instead of hindering the growth of Bitcoin, we should focus on finding environmental-friendly sources of energy to fuel Bitcoin further.
