Bitcoin mining has gained massive popularity in the last few years, driven by the unprecedented boom in crypto prices (Bitcoin highest price ever at $68000 in 2021) and easy availability of top-end mining hardware and best mining software.
The uncertain but attractive process of bitcoin mining is processed by using high-powered computers that help to solve complex problems related to it. In a recently published paper on Nature, M. J. Krause and T. Tolaymat made some startling discoveries while quantifying the energy consumed and carbon costs in the process of mining Bitcoin and other cryptocurrencies.
Individuals and organizations decide to “mine” Bitcoin, which has seen quite a bit of turbulence in the last year due to crackdowns on miners in various countries. To add to that, the world’s one of the richest people, Tesla owner Elon Musk created a buzz with his carbon footprint-related concerns due to Bitcoin mining. It’s worth noting if the crypto industry has to grow.
The data in the report is significant because it shows that mining cryptocurrencies aren’t as environmentally beneficial as many thought it was. What is the reason that Bitcoin mining requires so much energy? It all boils down to the method of “generating” coins for every individual user. Let’s know more about it.
What is Bitcoin mining?
Have you ever thought about how our current monetary system functions? The government has the ability and right to print as much money as it wants, risking inflation. Whenever we send or receive money, we must pay a relatively high fee for the payment to go through. With Bitcoin, things are a bit different due to the concept of “mining.”
Mining bitcoin (new gold) is particularly compared to gold mining. Comparing the energy cost of mining a bitcoin with gold or other minerals such as platinum, aluminum, and copper accounts for tremendous eating away from electric energy. A rough estimate claims that the amount of energy used to mine a single bitcoin can be used to run a dishwasher for a year.
Essential facts about Bitcoin mining energy consumption
1. It is estimated that bitcoin alone utilizes 40-75% of the world’s renewables.
2. The electricity consumption estimated by bitcoin miners is calculated on the basis of the Bitcoin Energy Consumption Index (BEXI).
3. As per some reports, bitcoin is slowly extracting our resources at a fast pace as the figures continue to increase.
4. By the end of 2020, bitcoin had consumed 2.55 gigawatts of electricity.
5. It is expected to take away more than 7.67 gigawatts of energy in the future.
6. On average, miners earn $100 approximately on each transaction, which is lucrative enough to entice individuals to join the crypto mining league.
How does Bitcoin Mining Operates
The process of bitcoin mining includes storing, verifying, and securing the bitcoins. The primary aim of mining bitcoin is to exchange valuable tokens. Mining is a risky process involving the rigorous and physical acts of digging.
A group of crypto miners is held responsible for downloading and running bespoke mining software. The crypto mining software runs along with the various pools of miners and converts them into blocks by proving their validity. This is done by performing complex calculations. These are calculated by covering the data presented in the blocks. While working with bitcoins, the miner does a lot of guesswork to determine the exact value of an integer.
Common steps in Bitcoin mining process
We can define crypto mining as a decentralized computational process. There are no third parties involved, and the users themselves exclusively mitigate transactions. The crypto mining process goes like this:
Users verify transactions of other users and thoroughly check for their validity.
They bundle authenticated transactions into a single block.
Afterward, the user selects the header of a block considered the most recent and inserts them into a new hash.
The fourth step in this process is the Proof of Work problem, which needs to be solved to verify the transaction.
If a solution exists, the block is added to the blockchain.
As a result, the person who mitigated the transaction receives a tiny fraction of a Bitcoin, which is calculated as a fee to those who have sent/received the money.
Total energy cost of mining Bitcoins
As per the research at the Oak Ridge Institute, the cost of mining $1 in Bitcoin is 17 megajoules of energy. How do traditional materials and other cryptocurrencies stack up to this huge energy expenditure?
Litecoin – 15MJ
Monero – 11MJ
Rare earth metals – 9MJ
Ethereum – 9MJ
Platinum – 6MJ
Gold – 5MJ
Copper – 4MJ
Of course, there are certain advantages to using Bitcoin and mining it. Users have an anonymous network on which they can make transactions. Also, there are a limited number of coins made, thus causing inflation virtually impossible. Despite the fluctuating price, more and more people have decided to mine Bitcoin. However, regular computers cannot mine Bitcoin effectively, thus urging users to buy specialized crypto mining hardware.
Current Bitcoin price and the future predictions
This digital currency has no fixed set of values, which is determined by the amount people are willing to pay. The same goes for the current price of Bitcoin. Most long-time miners and investors think of this as a preparation for a more significant rise in the near future.
The all-time high in terms of Bitcoin price was a staggering $68000 something in Nov 2021. This prompted many people to buy and start mining, thinking the meteoric rise would continue.
Unfortunately, most cryptocurrency enthusiasts faced a drastic fall in cryptocurrency prices. After the significant drop, there haven’t been many fluctuations, and the cost is either steadily rising, followed by a smaller drop, or vice-versa. But the fact remains that crypto market investing is highly volatile, and people keep wondering ‘why is Bitcoin price today’ more than ‘why is Bitcoin price going up today.’
Investing in the “digital dollar” Bitcoin - A risky affair?
Once we have gained a good amount of knowledge about the valuable coins of this era, we are left with another question “Should I invest in Bitcoin?” The answer to this question is solely dependent on the fact that 'will bitcoin become a long-term trusted value of the store.'
So, if, in the long term, BTC trades around a high price that goes 100 times more than its current price, it is only then one should decide to invest in it. On the contrary, seeing the current bitcoin value, you must patiently wait for the right time to invest in bitcoin.
Investing in bitcoin is very much similar to investing in stocks. You must keep yourself updated by getting appropriate information from the best bitcoin investment sites. Anyone can secure a bitcoin via the best crypto exchanges and store it in a digital currency wallet meant for transacting various digital currencies other than bitcoin.
Here are some more popular cryptocurrencies besides Bitcoin:
Ethereum (ETH)
Ethereum was launched in 2013 by programmer Vitalik Buterin. In his early days, Vitalik used to write for a magazine called Bitcoin weekly to earn five bitcoins for every article. Ethereum is regarded as the second most popular cryptocurrency and as a possible replacement for Bitcoin in the near future.
The current Ethereum price is suffering a setback due to the crypto market crash. It is yet unknown whether Ethereum will return anywhere near its peak of $4815 in Nov 2021. With some unique additions to the version of blockchain Ethereum is using, there are hopes that it will become the first widely applicable cryptocurrency.
Litecoin (LTC)
Litecoin, as a digital currency, is highly unique and considered decentralized money. It is free from censorship and accessible to everyone around the world. Using Litecoin, you can make payments at a low cost in a secure manner.
Ripple (XRP)
Founded in 2012 by Chris Larsen and Jed McCaleb, unlike other types of digital currencies, Ripple is a useful way to make transactions online. It acts as a direct connection between banks, payment providers, digital asset exchange and other corporations to complete transactions smoothly. XRP peak price was in 2018 when it touched $3.36.
Dogecoin
Dogecoin, founded as a meme coin by software engineers Billy Markus and Jackson Palmer, is commonly known as “Internet Currency” and is a unique and decentralized form of currency that helps to undertake smooth transactions by making online payments. It rose to fame when Elon Musk regularly showed interest in it through his tweets. It never picked up and never became mainstream crypto. Its peak price was $0.5597 in 2021.
Difference between Bitcoin and Ethereum
To begin with, we all know that both bitcoin and Ethereum function on “Blockchain” technology. However, the basic difference between Ethereum and Bitcoin lies in that the latter is far more robust than the former.
Recently, many people have started to purchase Bitcoin to invest in a company that raises money by using ICO. Since our regular or traditional currency does not have that kind of potential to purchase equity. For such transactions, tokens with bitcoins or Ether (Ethereum cryptocurrency) come into play.
Ethereum, the second-biggest cryptocurrency, turns out to be a dominant currency compared to the leading coin, “Bitcoin,” in today’s time. Ether, on the other hand, stays at par as it is commonly used to build new programs. It is just not a currency, and both currencies operate on blockchain technology.
Is there a solution to solve the energy problem related to Bitcoin mining?
In his study, Alex de Vries, an economist and data consultant, has expressed serious concerns over the energy consumption problem that comes with Bitcoin mining.
Experts strongly recommend adopting lightning network or Schnorr signatures as they believe it to be one of the best solutions to reduce wastage of energy consumption in mining cryptocurrency. This can be done by stopping the transactions from occurring while computers are closed. As a result, it can bring down the energy reduction used in mining bitcoin.
Also, shifting gradually to the Proof-of-Stake method, similar to what Ethereum does for mining, can prove to be a better solution to solve the complexity. This method works just like using renewable energy. It can reduce electrical energy consumption to a great extent. However, the experts are still unsure whether this method will have a negative impact on the security of the network.
