It seems the realm of cryptocurrencies is mutating. I’ve been basing some of my thoughts on the widespread observation that “mining” the basic tokens is becoming more and more costly in terms of power consumption. This, evidently, is beginning to upset some of the cryptocurrency users, who are advocating for a new paradigm for producing said tokens:
William Entriken, one of the authors of the NFT protocol for Ethereum, a popular alternative to bitcoin, says NFTs aren’t inherently bad, but that rapacious speculation is pushing them and cryptocurrencies down a destructive path as their carbon footprints rise.
Most cryptocurrencies rely on “proof of work” to secure their networks, meaning that computers must perform huge numbers of calculations to “mine” new currency and verify transactions on the blockchain. This uses large amounts of electricity – bitcoin’s annual power consumption is comparable to that of Finland.
Investing money into cryptocurrencies – either through simple speculation or by purchasing expensive artwork – boosts demand and therefore prices, says Entriken. That makes mining that cryptocurrency more profitable, but also more difficult, increasing carbon emissions.
Entriken contrasts cryptocurrencies with carbon offsetting, in which people pay to have carbon emissions removed from the atmosphere. “Bitcoin is the opposite of that. When you purchase bitcoin you’re purchasing carbon creation credits,” says Entriken. “When you purchase the $50,000 [of bitcoin] somebody else is directly putting that much carbon into the atmosphere. Ethereum is the same.”
He has called for Ethereum to switch from a proof of work (PoW) approach to a proof of stake (PoS) approach, which would remove the need for intense calculations by allowing the owners of existing coins to control the network, rather than the owners of the computing power. It is estimated this could cut the total energy demands of Ethereum by 99 per cent. “You have to switch to proof of stake. Proof of work should be illegal,” says Entriken. [NewScientist (3 April 2021)]
So what is “proof of stake”? Investopedia:
The Proof of Stake (PoS) concept states that a person can mine or validate block transactions according to how many coins they hold. This means that the more coins owned by a miner, the more mining power they have.
If this sounds puzzling, keep in mind that miners compete with each other – and all the losers in each competition are wasted energy. By limiting the field for each miner, there’s less competition and less waste.
On the other hand, there’s also less pressure to find new optimizations for mining.
But in a field that is coming under increasing pressure because of energy consumption, I suspect that concern is secondary.
