For miners, a serious question is brewing – where can we get energy for activities?
At the beginning of the year, Enel SpA, the largest energy supply company in Italy, negotiated with Envion AG, the Swiss start-up for mining, to sell energy from wind, sun, and other renewable sources.
These negotiations were part of Enel’s attempts to assess the growing electricity sales market for companies that produce crypto-currencies that require huge amounts of energy to conduct their operations.
In view of the growing interest in the world of crypto-currency leasing around the world and the increasing energy costs, energy supply companies are paying more attention to this sector, trying to get new customers.
“Enel, in particular, seeks to understand what the benefits of blockchain technology can get the energy business,” said Leonardo Zanella, head of the international trade department at Enel in January.
However, this interest had a negative outcome for Envion, because Enel ultimately decided not to provide its energy, saying in a report published by Reuters in early February that the company is not interested in selling energy for the cryptocurrency.
“Enel has taken a clear course to reduce carbon content and constant development and is considering the intensive use of energy for mining crypto-currency as an irrational practice that runs counter to the pursued Enel business model,” the company said.
The state-owned Enel is one of the leading energy-supplying European companies, which places special emphasis on renewable sources and the production of clean energy to combat climate change caused by the production of non-renewable energy.
Since the mining of cryptocurrency requires a significant amount of electricity to support the networked networks using the PoW, it is not surprising that the company, focused on regenerative energy, decided to abandon the miners as a new group of customers.
Bitcoin mining and energy consumption are hot debates
And what about the energy costs for mining?
According to Digitconomist estimates, the annual power consumption for the bitcoin network reaches 47.4 TWh, which is roughly equal to the annual energy consumption in Singapore. And this, in turn, is 0.21% of the total world electricity consumption.
However, not everyone agrees with Digiconomist’s estimates.
Lecturer of Stanford University Jonathan Kumi told CNBC:
“I would not argue that only bitcoin is behind the total electricity consumption. This is only a tiny fraction of the consumption from all data centers. ”
Kumi also stressed that the Digiconomist model includes many assumptions, and stated that it was initially incorrect because it uses estimates of the income of miners and costs, rather than reliable data.
“If you do this, you make many mistakes. This is an absolutely unreliable way of conducting the analysis, and no self-respecting analyst of the energy market would use it, “he told CNBC.
Christian Catalini, an associate professor at the Sloan School of Management at the Massachusetts Institute of Technology who studies crypto-currencies, shares Kumi’s opinion and says:
“I think that many of the calculations that you see today are based on very approximate assumptions. I do not think that anyone will be able to provide reliable data today on the electricity consumption for mining bitcoin without obtaining these data from the miners. ”
Regardless of the accuracy of estimates of electricity consumption by the bitcoin network, the reality is that its extraction at the current stage is not harmless to the environment, and this should change. Otherwise, the miners will face increasingly frequent refusals from environmental agencies, non-governmental organizations, and governments concerned with environmental protection.
Mining cryptocurrency – it’s not just Bitcoin
Another aspect that should be taken into account when speaking about energy consumption for crypto-currency mining is that bitcoin is only about 35% of the total crypto-currency market.
However, most of the almost 1,500 digital currencies available today use a power-consuming mechanism for proving work performance for their networks. This means that the electricity consumption for crypto-currency production is significantly higher than the figures voiced by experts for bitcoin.
Almost half of the top 15 crypto-currencies, including the Ethereum, Bitcoin Cash, Litecoin, Monero and Ethereum Classic, use the PoW algorithm for processing and verifying transactions. And since the total market capitalization of these coins exceeds the capitalization of bitcoins, the energy consumption of these blockchain networks should also be taken into account when assessing the impact of mining.
Mining with regenerative energy and alternative solutions
Not surprisingly, many crypto-currency majors, such as Envion, are trying to use regenerative energy for their operations in order to maintain the network of networks without harming the environment. When using renewable energy sources – wind, sun or water – mining can become more environmentally friendly.
One more optimal solution is the crypto currency, using alternative work proof mechanisms that do not require high energy consumption for transaction processing. These alternatives include proof of possession (PoS).
While PoW requires the use of large processing power to verify and process transactions for which the miners receive new tokens, the proof of possession mechanism uses the coins owned by the network participants to obtain the solution. Consequently, no special equipment is required for it. Instead, network members who put more tokens will receive more new coins for the contribution to support the network.
In 2014, the digital currency of NXT became the first coin using exclusively PoS. Since then, several other currencies have appeared, including Reddcoin, OKCash and a popular token with an emphasis on PIVX privacy. In addition, etherium developers are already working on switching the network from the proof of work mechanism to the ownership proof mechanism.
Given the instability of the mining of crypto-currency, it is likely that many future crypto-exchange networks will use a more environment-friendly solution mechanism, such as PoS, and bitcoin miners will look for sources of regenerative energy.