• March 22, 2023

What is Your Company’s Stand on Energy Efficiency in Crypto Mining?

Energy Efficiency in Crypto Mining

As governments around the world look to regulate and promote cryptocurrency, they’re also considering how best to reduce its impact on the climate. With estimates of annualised electricity usage ranging from 120 to 240 billion kilowatt-hours globally, crypto mining is one of the biggest contributors to global greenhouse gas (GHG) emissions.

To address this issue, there are a number of ways to improve the energy efficiency of crypto mining. Governments should encourage miners to move to more sustainable locations and encourage companies that manufacture or sell equipment to develop more efficient machines.

Moreover, governments should ensure that mining equipment is designed to ASIC Crypto Miners vendor carbon emissions during production and recycle electronic waste responsibly. They should also work with regulators to set energy efficiency standards for crypto-asset mining equipment, blockchains, and other operations.

The main reason why crypto mining is so energy-intensive lies in the consensus mechanism used to secure its transactions, which is based on proof of work (PoW). This asymmetric computation process requires specialised hardware that runs on high-energy power supplies. It also depends on the computational power of thousands of miners. Because miners’ rigs have to be updated frequently, the process involves a lot of energy and consumes a lot of energy-intensive chemicals to maintain.

What is Your Company’s Stand on Energy Efficiency in Crypto Mining?

Switching to a more energy-efficient consensus mechanism could help reduce energy consumption, but this requires gaining majority buy-in from miners and changing the network design. The PoW consensus mechanism is the most popular one, but a range of other mechanisms are available that could be more energy efficient.

Alternative consensus mechanisms, including proof-of-stake (PoS) and proof-of-reputation (PoR), are less energy-intensive and may offer improved performance. However, these options are in development and will likely take some time to become mainstream. The United States should work to decouple the crypto industry from its growing greenhouse gas footprint and increase its use of renewable energy to meet federal clean energy and climate change goals.

According to a recent White House report, crypto-assets generate 25 to 50 million metric tons of carbon dioxide (Mt CO2) per year, which is equivalent to 0.4% to 0.8% of total greenhouse gas emissions in the United States. The report recommends that federal agencies obtain data on the mining energy usage and fuel mix, power purchase agreements, environmental justice implications, and demand response participation to understand, monitor, and mitigate impacts.

A more efficient consensus mechanism, such as Proof-of-stake (PoS), can reduce mining energy consumption by reducing the amount of energy that must be mined to validate transactions. Alternatively, miners can be required to hold a certain amount of a digital asset, which lowers the energy consumption per transaction while ensuring the security of the system.

Another option to decrease energy consumption is to use renewable or ‘clean’ power produced by solar or wind farms, which can be stored in batteries for later use. This can prevent the electricity that goes to waste when solar or wind farms produce more than is needed for the grid at a given time.

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