A New Green Cryptocurrency Called Chia Uses A Less Energy
- A new green cryptocurrency called Chia is set to start trading on Monday, May 3.
- Chia uses “proof of space” and “proof of time” instead of bitcoin’s “proof of work” to mint new coins.
- The rise of Chia is already causing shortages and price increases at hard drive and SSD manufacturers.
A new “green” cryptocurrency called Chia is set to start trading next week. It was created by Bram Cohen, the inventor of BitTorrent, and uses what’s called “proofs of space and time” to “farm” rather than “mine” new coins.
Energy Consumption Model And Key Assumptions
Even though the total network hashrate can easily be calculated, it is impossible to tell what this means in terms of energy consumption as there is no central register with all active machines . In the past, energy consumption estimates typically included an assumption on what machines were still active and how they were distributed, in order to arrive at a certain number of Watts consumed per Gigahash/sec . A detailed examination of a real-world Bitcoin mine shows why such an approach will certainly lead to underestimating the networks energy consumption, because it disregards relevant factors like machine-reliability, climate and cooling costs. This arbitrary approach has therefore led to a wide set of energy consumption estimates that strongly deviate from one another, sometimes with a disregard to the economic consequences of the chosen parameters. The Bitcoin Energy Consumption Index therefore proposes to turn the problem around, and approach energy consumption from an economic perspective.
Bitcoin miner earnings and expenses are currenly as follows:
Bitcoins Electricity Usage Compared With Countries
Estimated electricity consumption . Shaded region represents the range of possible values.
That usage, which is close to half-a-percent of all the electricity consumed in the world, has increased about tenfold in just the past five years.
The Bitcoin network uses about the same amount of electricity as Washington State does yearly
more than a third of what residential cooling in the United States uses up
and more than seven times as much electricity as all of Googles global operations.
So why is it so energy intensive?
For a long time, money has been thought of as something you can hold in your hand say, a dollar bill.
Currencies like these seem like such a simple, brilliant idea. A government prints some paper and guarantees its value. Then we swap it amongst ourselves for cars, candy bars and tube socks. We can give it to whomever we want, or even destroy it.
On the internet, things can get more complicated.
So a group of free thinkers or anarchists, depending on whom you ask started to wonder: What if there was a way to remove controls like these?
In 2008, an unknown person or persons using the name Satoshi Nakamoto published a proposal to create a cash-like electronic payment system that would do exactly that: Cut out the middlemen. Thats the origin of Bitcoin.
This concept took a while to catch on.
It starts with a transaction
A global guessing game begins
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Key Challenges For Using Renewables
It is important to realize that, while renewables are an intermittent source of energy, Bitcoin miners have a constant energy requirement. A Bitcoin ASIC miner will, once turned on, not be switched off until it either breaks down or becomes unable to mine Bitcoin at a profit. Because of this, Bitcoin miners increase the baseload demand on a grid. They dont just consume energy when there is an excess of renewables, but still require power during production shortages. In the latter case Bitcoin miners have historically ended up using fossil fuel based power .
Further substantiation on why Bitcoin and renewable energy make for the worst match can be found in the peer-reviewed academic article Renewable Energy Will Not Solve Bitcoins Sustainability Problem featured on Joule. With climate change pushing the volatility of hydropower production in places like Sichuan, this is unlikely to get any better in the future.
Cryptocurrency Advocates Defend Mining
Supporters have downplayed the energy consumption of cryptocurrencies, claiming that mining operations tend to concentrate around areas with surplus renewable energy. A 2019 report by CoinShares, a pro-cryptocurrency research firm, estimated that 74.1% of the electricity powering the bitcoin network came from renewable sources, making bitcoin mining “more renewables-driven than almost every other large-scale industry in the world.”
These claims rest on the fact that cryptocurrency miners are not geographically fixed, allowing them to move in search of surplus energy. According to CoinDesk, some petroleum companies are exploring ways to power mining rigs from gas flares, which would otherwise be wasted energy. Some Chinese mining firms migrate from one province to another in search of the cheapest energy, thereby supporting cheap renewable providers in those locations.
Calculations of bitcoin’s renewable energy usage are controversial and often disputed. For example, a report by the Cambridge Center for Alternative Finance found that only 39% of bitcoin mining comes from renewable energy. Even with the most optimistic estimates of renewable energy use, the network represents a net contributor to carbon emissions.
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Which Is The Most Environmentally Friendly Cryptocurrency
When determining the environmental impact of various cryptocurrencies, its important to note that energy consumption is not necessarily equivalent to carbon emissions. The Harvard Business Review indicates that Bitcoin consumes about 110 terawatt hours of electricity per year, which is roughly equivalent to one-half of one percent of annual worldwide energy production. For investors seeking sustainable cryptocurrency, there are some much better choices available in the green crypto marketplace. The following includes 19 of the best options for environmentally friendly cryptocurrencies in the financial marketplace.
What Can Be Done
Solving Bitcoins near-continent-sized energy consumption problem doesnt require returning to centralized systems, like Visas networkafter all, the central promise of Bitcoin is the elimination of middlemen like the card networks and their concentrated power over finance. Instead, Bitcoins advocates have more than a few options.
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Going Public And Embracing Regulation
Unlike many other cryptocurrency offerings, Chia has a formal company behind it, and they intend to go public.
“We hope to file and list our equity in the next six to 12 months,” Gene Hoffman, the CEO and President of Chia Network told Decrypt.
Not only that, but Chia Network has also said it will embrace regulation because management has seen “scams and farces” in the space hurt investors.
“It should not be controversial that investors deserve protection through public disclosure and certainly the public shouldn’t be sold investments without that legally required transparency,” the company’s whitepaper states.
Other Environmental Impacts Of Cryptocurrency Mining
In addition to energy consumption, cryptocurrency mining also generates a significant amount of electronic waste as hardware becomes obsolete. This is especially true for Application-Specific Integrated Circuits, specialized hardware for mining the most popular cryptocurrencies.
Unlike other computer hardware, these circuits cannot be reused for any other purpose, and they quickly become obsolete. According to Digiconomist, the bitcoin network generates between eight and 12 thousand tons of electronic waste every year.
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What Is The Most Energy Efficient Cryptocurrency After Tesla Stopped Accepting Bitcoin
Bitcoin has become criticised in the past for using so much energy per transaction
Bitcoin has become under the spotlight recently due to Elon Musk and Tesla pulling the coin from being used to purchase vehicles.
The cryptocurrency has been criticised in the past for its large climate footprint. According to the Cambridge Center for Alternative Finance , Bitcoin currently consumes around 110 Terawatt Hours per year 0.55 per cent of global electricity production.
Musk also called the amount the currency used as “insane” in another tweet causing the price of the coin to drop.
So with many other investors looking at alternatives, people are wondering what the most energy efficient crypto is which could be Tesla’s next choice to accept.
So what is the most energy efficient cryptocurrency out there and how does it compare to Bitcoin?
Here’s everything we know:
Solar Energy As A Solution To Minimizing Cryptocurrencys Energy Consumption
While the massive energy usage of cryptocurrency miners will continue for some time, some people who are concerned about the environment are presenting viable solutions to the current issues. Coinwire suggests that solar energy is a valid alternative for powering mining rigs since solar plants can provide constant, renewable energy that is cheaper than grid power. For example, an A 1-megawatt solar project could potentially provide energy to mining operations in California. Green Tech Media looked at the numbers behind a solar Bitcoin mine that is powered by a 1-megawatt PV system.
Given the current technology in creating solar panels, it wont be impossible to create cheap, sustainable electricity for mining operations. San Diego-based company Clean Spark is one of the first companies in the world who want to show that designing a microgrid to power large-scale cryptocurrency mining operations is possible. The companys proprietary modular and containerized microgrid will begin construction in two months time.
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Why Is Cryptocurrency Bad For The Environment
It is the level of computer processing power required to mine cryptocurrency that is worrying environmentalists.
The mining process uses:
- High-powered computers which compete toverify transactions in return for coins
- Vast amounts of electricity to power complex algorithms
- Non-renewable energy sources such as coal, the dirtiest fossil fuel
How Much Energy Does It Take To Mine Different Cryptocurrencies
Todays top cryptocurrencies are worth a lot of money. Bitcoin hit $17,000 per coin in December 2017 it has since dropped significantly but it is proof of the soaring popularity of the worlds first mineable digital fund. But while the media mostly focuses on the aspect of the cryptocurrencys prices, theres a factor of cryptocurrency mining that is just as important as the coins value. That is, the amount of energy being used to mine the cryptocurrencies. After all, the formula for breaking even in cryptocurrency mining is the digital funds market value minus the electricity costs of mining it.
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Bitcoin And Climate Change
Any process that comes with carbon emission brings climate change into focus. Several research findings on Bitcoin have had varying results. One study claimed that Bitcoin alone would push global warming by above 2%. The studies show that mining is a wasteful use of energy.
Subsequent reports have had different results. They claim the impact of Bitcoin mining on the environment is minimal. In contrast, the earlier studies relied on country-specific the other use a global viewpoint. Any review that uses a smaller control measure is biased.
Even in China, there are discrepancies with the results. For example, the emissions at Inner Mongolia vary with those at Sichuan. These places rely on different power sources hence the variations.
The amount of carbon mining releases also varies in the new study. While in the earlier report it was 63 megatonnes, the latest research makes it at 17.29. Still, China is the leading country in emissions. It accounts for 47% of the world’s total carbon emissions.
Still, the finding means the world should stop worrying about Bitcoin. The miners and the world over still need precautions. There is a need for more green energy in crypto mining.
Some believe the Bitcoin-climate issue is more human than crypto. That it is the humans who have failed to adopt clean energy quickly. Most argue it’s the role of the governments to control mining.
Environmentally Sustainable Cryptocurrencies To Invest In Right Now
Cryptocurrency might be best known for its potential financial risk, but its increasingly under fire for another less-than-desirable issue. In recent months, concern has swirled around the negative impact that crypto is having on the environment. That impact, in a nutshell, is that as cryptocurrency trading becomes more common, so does energy use as a result of it.
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The Environmental Future Of The Blockchain
Environmental impact aside, right now electricity costs eat into estimated 28% of Bitcoin minings profitability each year according to Digiconomist.
For example, I believe that smart contracts will allow companies to automate much of their complex payment and business process systems by automatically checking to make sure that a purchase order, for example, complies with the terms and conditions of a contract, he says. This might allow a company to reduce the number of employees who need to commute into an office to process orders, resulting in fewer transportation-related carbon emissions.
Though we may not know the full potential green applications of blockchain technology for years to come, already theres talk of using it to combat big issues, like helping companies to better log carbon emissions or even, in a truly meta move, using blockchain-powered carbon credits to move to a carbon-neutral future.
Hurdles Before Indias Cryptocurrency Miners
Indias digital coin ecosystem is rapidly expanding. While there is no official data on the extent of crypto players in the country, more than 100 million Indians are estimated to be part of the $3 trillion global community. It ranks second on the world cryptocurrency adoption index, according to Chainalysis.
Cryptocurrency mining, the complex process of creating new virtual coins through some high-level mathematical equations, is one of the ways to own these assets. However, it is still a small subset of the sector in the country. And there are several reasons for this.
For a start, digital assets are technically illegal in India.
Experts say there are a considerable number of miners in Indiaup to 300 people and 40 organisations, according to somediscretely producing cryptocurrencies like bitcoin and ethereum. They operate on a small scale due to a lack of regulatory clarity.
It is a disorganised sector, said Raj Kapoor, founder of industry body India Blockchain Alliance. Everybody is worried about a clampdown on cryptos. It is a great opportunity from a growth perspective, but India is missing the bus out here.
A long-running dialogue between industry experts and the government over the ecosystems benefits and pitfalls has failed to bear fruit till now, he said.
This makes crypto-mining better suited to colder climates. In a tropical country like India, only a few statesJammu and Kashmir and Himachal Pradesh among themhave temperatures suitable for the process.
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Greener Coins To Watch
If this seems a bit too much like capitalism, some of the coins using proof of stake, such as Cardano, operate a mechanism where groups of participants or pools of users are selected to create new blocks based on the stake they control in the network.
Cardano is a platform and its Ada coin is one of the main green bitcoin alternatives using proof-of-stake as its consensus mechanism, along with Polygon and Cosmos.
Cardano uses a proof-of-stake protocol that its creators say is the first provably secure mechanism of its type, and the first blockchain protocol to be based on peer-reviewed research and has proven security guarantees able to facilitate the propagation of global, permissionless networks with minimal energy requirements.
Polygon is another proof-of-work framework, on which the main token is called MATIC and is based on Ethereum blockchains.
Cosmos, where the currency is called Atom, is a third proof-of-stake contender.
Ripple and its related cryptocurrency, XRP, does not use proof-of-work nor staking, with its unique distributed consensus mechanism is said to be faster, cheaper, more reliable and more sustainable than most competitors.
These greener alt-coins have all seen spikes since Musk said he was concerned about rapidly increasing use of fossil fuels for Bitcoin mining and transactions.
Since the start of April, Cardanos Ada has risen over 80% to US$2.13, Matic is up over 350% to US$1.75 and Atom is up around 17% at US$22.87.
A More Detailed Estimate
Later on, more granular information became available in the Global Cryptocurrency Benchmarking Study by Garrick Hileman and Michel Rauchs from 2017. In this study, they identified facilities representing roughly half of the entire Bitcoin hash rate, with a total consumption of 232 megawatts. Chinese mining facilities were responsible for about half of this, with a lower bound consumption of 111 megawatts. This information can be used to get a more accurate idea of the carbon emission factor in grams of carbon dioxide equivalent per kilowatt-hour that applies to the electricity used for mining.
The table below features a breakdown of the energy consumption of the mining facilities surveyed by Hileman and Rauchs. By applying the emission factors of the respective countrys grid, we find that the Bitcoin network had a weighted average carbon intensity of 475 gCO2eq per kWh consumed.
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Did You Know Bitcoin Runs On An Energy
Ever since its inception Bitcoins trust-minimizing consensus has been enabled by its proof-of-work algorithm. The machines performing the work are consuming huge amounts of energy while doing so. Moreover, the energy used is primarily sourced from fossil fuels. The Bitcoin Energy Consumption Index was created to provide insight into these amounts, and raise awareness on the unsustainability of the proof-of-work algorithm.
A separate index was created for Ethereum, which can be found here.
Green Coins: 5 Bitcoin Alternatives Tesla Could Choose
Musk need not worry about not having any alternatives there is a newly popular class of cryptocurrencies that are putting low-energy consumption at the forefront of their business models.
Maybe Tesla should keep its eyes on a crypto like Cardano . Cardano is one of the largest cryptos in terms of market capitalization. It also is a much more efficient alternative to Bitcoin, thanks to its proof of stake consensus, rather than BTCs proof of work consensus, which takes much less computing power to complete a transaction.
Even more efficient is Stellar Lumens a currency that subverts proofs entirely by authenticating transactions through set trustworthy nodes. The result is a crypto that uses even less energy. Another green crypto that chooses to stay away from proof algorithms is Nano . With Nano, users elect their own representatives to work to authenticate blocks on the chain securely.
Coins like Chia are appealing options in that mining them is very accessible. One can earn Chia simply by allotting space on their computers hard drive for the network to run. The innovative play allows one to mine coins on a single computer using spare space, a welcome change to the gigantic computer rigs required to mine Bitcoin.
On the date of publication, Brenden Rearick did not have any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
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