Cryptocurrencies such as the widely-used Bitcoin are here to remain; however, the high-energy consumption associated with the blockchain technologies supporting these currencies raises significant ecological concerns.
What is the mechanism behind how blockchain systems function?
Proof-of-work (PoW) blockchain networks like Bitcoin consume substantial computing resources; miners tackle complex mathematical puzzles to earn cryptocurrency rewards. according to The Block.
These procedures confirm transactions and initiate new blocks, yet they require massive amounts of energy since miners strive to outpace their rivals. Bitcoin mining by itself consumes about 0.5% of the global electricity usage.
Alternatively, the proof-of-stake The proof-of-stake (PoS) consensus mechanism allows validators to earn transaction fees by holding and staking tokens. This approach requires fewer computational resources compared to traditional methods since it depends more on the assets held by token owners rather than extensive computing power.
Ethereum, as detailed in the report has transitioned to Proof of Stake with its latest 2.0 update, reportedly making substantial strides in decreasing its environmental impact by approximately 99.95%.
Why should you care about the rise in cryptocurrency exchanges?
A United Nations study has disclosed that digital currencies — together with data centers where many are hosted — are impacting more than just the electricity grid, which is cause significant worry , because their significant energy consumption can result in power outages and increased electricity costs.
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Water resources and land use are also major factors in the pollution they generate.
Some believe the expansion of cryptocurrencies is helping drive innovation , as numerous data centers shift to renewable sources To fulfill their enormous energy requirements.
However, UN scientists reported that dirty fuels still serve as the main energy suppliers for digital currencies, with Bitcoin being used as an illustration. The research, spanning from 2020 to 2021, revealed that 45% Of its energy mix, coal accounted for a significant portion, closely trailed by 21%. natural gas .
Worldwide, data centers consume 1% of global electricity usage, with major economic powers like the United States experiencing draws of up to 4% , as stated by the International Energy Agency. It is important to mention, though, that these figures encompass machine learning And other procedures aside from just cryptocurrency.
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"Technological innovations are often associated with unintended consequences and Bitcoin is no exception," said study lead Professor Kaveh Madani, the director of the United Nations University Institute for Water, Environment and Health (UNU-INWEH).
"Our findings should not discourage the use of digital currencies. Instead, they should encourage us to invest in regulatory interventions and technological advancements that improve the efficiency of the global financial system without harming the environment."
Indeed, blockchain technology has enabled new economic models, decentralization, and greater transparency for some financial transactions.
The environmental impact of crypto, especially due to the energy-hungry Proof-of-Work systems, continues to be a substantial hurdle for the industry, according to The Block. concluded .
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Specialists raise concerns as quick technological progress challenges worldwide energy grids: 'Innovations frequently come with unforeseen outcomes.' first appeared on The Cool Down .
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