Bitcoin does not need to retain its current energy-intensive proof-of-work mechanism, but it is a familiar and profitable mechanism for many large companies.
When Ethereum completed an upgrade that changed its authentication method from Proof of Work (PoW) to Proof of Stake (PoS) in September 2022 called “The Merge”, the blockchain was down 99%. Meanwhile, Bitcoin continues to operate on a proof-of-work basis, consuming roughly the same amount of electricity each year as the Philippines.
“Proof of work has the disadvantage of wasting large amounts of energy and is therefore harmful to the environment,” said Professor Neil Koblitz of the University of Washington and co-author of the elliptic curve cipher behind the signature number. of bitcoin. zing.
Bitcoin Mining Becomes A Thorn In The Eyes Of Many Countries
Another problem with this is that the mechanism doesn’t work as well as bitcoin advocates initially hoped. Bitcoin mining is largely concentrated on a few giant computer farms, while Bitcoin’s philosophy should be decentralized mining, done by large numbers of individual users.”
Most bitcoin mining today takes place in the top 5 farms in the world. These farms, accompanied by high electricity consumption and emissions, have become a thorn in the side of many countries. China has been pushing to end domestic bitcoin mining by mid-2021, which has led many big miners to look to other regions of the world for cheap energy to set up shop.
After moving to places like Kazakhstan, bitcoin miners basically keep putting pressure on the grid and relying on coal power, causing local blackouts. In upstate New York, where cryptocurrency miners are exploiting shuttered factories and empty warehouses, residents complain of rising electricity bills and system noise. Currently, the United States is home to around 38% of all bitcoin mining.
Several countries, including Kazakhstan, Iran and Singapore, have imposed restrictions on cryptocurrency mining. In April, the European Parliament will pass the Crypto Asset Markets Act (MiCA), which will force crypto companies to disclose information about the environment. The law is expected to take effect around 2024
The European Central Bank has previously stated that it cannot imagine a world in which governments ban gasoline cars in favor of electric cars without banning the cryptocurrency’s CO2 emissions.
“Some lawmakers have asked why Bitcoin didn’t follow Ethereum,” Alex de Vries, a data scientist at Digiconomist, a website that tracks energy usage in cryptocurrencies, told MIT Technology Review.
The United States is also trying to stop wasting energy on Bitcoin. In November 2022, New York became the first state to stop issuing new cryptocurrency mining licenses to fossil fuel power plants. The new law also requires New York City to study the impact of cryptocurrency mining on greenhouse gas emissions.
Bitcoin Could Be Cleaner
In principle, a small group of people running Bitcoin code, called a “maintainer”, can move the blockchain to a PoS.
“The decision to change will be made by those responsible for technical troubleshooting. I don’t think there will be a formal ‘vote’ by users, or that computer farms will have a say in this.”
Most likely, Bitcoin is waiting to see how Proof of Stake works on Ethereum. GS Koblitz said that if Ethereum doesn’t have big problems, there will be less risk for Bitcoin transfer. However, he also noted that if Bitcoin switched to PoS, all mining farms would lose their business.
The top bitcoin mining pools collect a total of 900 new bitcoins a day, or over $20 million, not including transaction fees for the new blocks they mine.
Faced with the possibility of abandoning this business model, miners will likely find a way to “hard fork” – splitting the blockchain into two incompatible versions – to preserve the Proof-of-Work branch. Bitcoin and insist it is the real Bitcoin, predicts Jorge Stolfi, a computer scientist at the State University of Campinas in Brazil who has closely followed Bitcoin since its early days. However, if “dirty” mining continues, Bitcoin could be phased out by governments and many societies, who are becoming increasingly intolerant of emissions and energy waste.