It appeared like nothing could stop Bitcoin’s ascent to the top of the cryptocurrency world. A single Bitcoin cost $64804 at one time in April of this year. Eventually, the fall began, propelled by two major news stories.
Elon Musk warned against the use of fossil fuels to power Bitcoins, citing its massive energy consumption as a cause to discontinue accepting cryptocurrency payments. There was a shutdown of over half of China’s Bitcoin mining operations, with energy consumption cited as one of the causes.
Bitcoin and Energy Consumption
It is necessary to understand how Bitcoins operate and utilise energy to make sense of both options. Cryptocurrency bitcoin now consumes about 110 Terawatt Hours each year, according to the Cambridge Center for Alternative Finance (CCAF). That’s 0.55% of the world power production or the yearly energy consumption of Malaysia or Sweden.
Sounds like much energy, no? Bitcoin requires much power, but why exactly? Well, Bitcoin introduced Proof of Work, in which distinct parties verify the records and transactions kept in a blockchain by performing verifiable proof work.
To verify Bitcoin transactions, computers from all around the world participate in the verification process. As a result, minors get bitcoin.
Eco-friendly Cryptocurrency: Why It’s Important
As additional cryptocurrencies have joined, Bitcoin and crypto have become more popular since the pandemic. Therefore, the energy required to generate them has significantly increased. Fueling the digital currency of the future with fossil fuel-emitting energy sources such as coal seems futile.
Corporates like Paypal and Mastercard and countries such as El Salvador are aiming to use cryptocurrencies for transactions. Additionally, converting them to legal money shortly. Although this week’s earnings report revealed that Tesla has $1.3 billion worth of Bitcoin, Musk has vowed to explore accepting Bitcoins once again.
If institutions and corporations adopt the cryptocurrency, climate sceptics and conservationists need to be won over by Bitcoin’s environmental initiatives.
Globally, attempts are in progress to decrease the carbon footprint created by cryptocurrencies in light of all this. Decidedly, El Salvador will adopt Bitcoin as legal tender in September and produce electricity by mining bitcoin using geothermal energy from volcanoes.
The blockchain applications that employ proof-of-stake protocols replacing the traditional Proof-of-Work apps that need users to solve problems. Unlike other cryptographic protocols, Proof-of-Stake does not require you to solve complicated mathematical riddles that waste much energy.
A complex shift from proof of work to proof of stake is taking place on Ethereum, the second most popular cryptocurrency. Cryptocurrencies using Proof of Stake over Proof of Work include Avalanche, Cardano and Harmony. However, they’re minimal, and their effect on the crypto world is limited compared to bitcoin or ether.
Sharding is another method that green technology is being incorporated into cryptocurrencies through the use of blockchain. Zilliqa, a blockchain platform, uses sharding, which entails splitting blockchain workloads across distinct groups of nodes. Because each node only processes the allotted data to its shard, less energy consumption takes place overall.
El Salvador’s use of green energy and Ethereum’s shift to a Proof-of-Stake architecture is an indication that a fundamental change is in motion in Bitcoins and cryptocurrencies. Another new phase will begin, one that is more in line with environmental aims and carbon neutrality.
While the move to green energy isn’t going to happen quickly, the cryptocurrency industry’s initiative and desire to do so bodes well for itself and the earth in the months to come. Since effective and permanent green solutions are here to stay, cautious investors and others concerned about the environment who have shied away from investing in cryptocurrencies because of their excessive energy consumption may now rest comfortably.