45
Digital currencies like Bitcoin, Ethereum, and Litecoin may still be a niche market, but their popularity is growing every day. As the value of these digital assets increases along with their adoption, miners the people who verify transactions on cryptocurrency networks are incentivized to invest in more hardware to mine new coins. In the case of Bitcoin and other proof-of-work cryptocurrencies, this means lots of energy hungry GPU and ASIC miners running nonstop. With so many miners competing for rewards, it's become almost necessary for them to invest in additional hardware to keep up with the difficulty of mining each coin. However, that much energy consumption also comes at a price. Adding up all ASIC mining rigs from around the world shows that they consume around .00001% of all the electricity produced globally per day. That may not seem like a lot, but as time goes on and cryptocurrencies continue to grow as an asset class, that amount is only going to increase substantially.
How much electricity do Bitcoin and Ethereum miners use?
The Bitcoin network currently consumes roughly the same amount of energy as the nation of Austria. More than 100,000 Bitcoin miners currently operate around the world, and their combined electricity consumption is equivalent to the power of 100 nuclear reactors. In fact, Bitcoin miners have been consuming more and more energy each year since the network first began. According to one estimate, if Bitcoin miners are not able to transition to a less energy-intensive consensus mechanism like Proof of Stake (PoS), Bitcoin mining will consume all the electricity produced worldwide by 2030. This sheer amount of energy consumption has led many to call for a reduction in mining rewards to decrease the network’s annual energy bill. Some have even gone so far as to suggest that this excessive power consumption is an unavoidable consequence of the Proof of Work mining system. However, the Ethereum network is currently consuming roughly double the amount of electricity used by the Bitcoin network. This is due to the fact that Ethereum uses a more energy-intensive mining algorithm called Ethash, which is designed to be ASIC-resistant. While this algorithm was originally intended to prevent centralization of mining hardware, it has also allowed Ethereum miners to continue using GPUs to mine new coins—despite the fact that ASICs have been available for Ethash for a couple years now.
How is the Ethereum Network currently consuming energy?
The Ethereum network is currently consuming roughly 100 terawatt hours of energy per year, with the majority being used by miners. This represents about 0.9% of the world’s annual energy, according to some estimates. While this is still a small amount compared to other industries, it is expected to rise significantly in the coming years. One estimate predicts that the Ethereum network will consume 11 terawatt hours of energy per year by 2020, while another puts the estimate at 19 terawatt hours per year. The main reason for Ethereum’s rising energy consumption is an increasing difficulty rate. As more miners join the network, the difficulty rate increases as well, making it increasingly difficult to find new blocks and receive mining rewards. This is why the Ethereum network is currently discussing a switch to a new consensus mechanism like Proof of Stake a system that uses significantly less energy than PoW. If the network is able to transition to a more energy-efficient PoS consensus mechanism, it will allow miners to continue profiting from the Ethereum network without consuming as much energy.
Solana: A More Efficient Blockchain?
If the Ethereum network does make the switch to PoS, it will be an important step towards sustainability. However, Solana is planning to launch a more efficient blockchain from the very beginning. Unlike Ethereum and other PoW blockchains, Solana is a PoS blockchain that uses only a fraction of the energy currently required for PoW mining. To achieve this reduction in energy consumption, Solana uses an asynchronous protocol that is designed to scale well and run on relatively cheap hardware. This asynchronous protocol works by dividing the network into different “shards”, or parallel blockchains, which collectively verify transactions on the network.
Solana’s Solutions
In addition to using an asynchronous verification protocol, Solana is also designed to use a novel verification method called Proof of History. This method of verification allows new blocks to be added to the chain asynchronously, while existing blocks are verified synchronously. This means that during periods of high transaction volume, new blocks can be added to the chain without slowing down verification of older blocks. This will allow the network to maintain the same transaction throughput regardless of how many miners are competing for rewards. Finally, Solana can also be used to create what are called bonded channels. Using this feature, two parties can create a channel where one party deposits an amount of cryptocurrency into a smart contract on the blockchain. The other party is then able to redeem this deposit at any time, but only after a certain amount of time has passed.
Conclusion
As cryptocurrencies become more valuable and more widely used, their networks will require additional hardware to process all of the transactions being made. This will cause a proportional increase in energy consumption that may result in an unsustainable mining industry unless the industry is able to transition. However, there are a number of initiatives being taken by blockchain developers to make their networks more sustainable. One of the most promising approaches is to use a more energy-efficient mining algorithm that can be verified using cheap hardware. By designing a blockchain that is less energy-intensive, developers can ensure that their network will remain sustainable even if it experiences a significant increase in transaction volume.
