Energy consumption is one of the biggest critiques of cryptocurrency and blockchain asset mining worldwide. According to the Bitcoin Energy Consumption Index 1 Bitcoin mining alone consumes more energy than Denmark, Belarus and Bulgaria do as individual countries. Some blockchain networks, like Ethereum, are moving away from mining as the mechanism for verifying asset transactions, but the Crypto Noobs are taking a different approach. We think mining is the future, and we’re solving this problem with good old fashioned renewable energy.
Let’s take a look at why we like mining, and why we think Renewable Processing Power (RP ²) is the future of sustainable blockchain technology.
The Significance of Mining
Blockchain asset mining, AKA Proof of Work (PoW,) is the popular protocol and foundation for the distributed architecture of many leading blockchain networks like Bitcoin and Litecoin. Mining serves two main purposes:
Validating blockchain transactions between parties with transparency and consensus across the network.
Rewarding miners for that work by releasing new assets, AKA “block rewards”.
There is some important spinoff functionality of these two major purposes. Let’s take a look at them.
Creating a Baseline for Value
Miners need to be rewarded because they incur costs for the work that they do. For instance, miners need to own specialized computers to perform the mining work. Those specialized computers require large amounts of power to perform the task of mining. You could argue that the time and effort to keep miners online 24/7 is another cost input. In essence, these cost inputs creates a baseline value for the assets that are created by the mining process.
Securing All Things
The fundamental security feature of blockchain networks is the distributed architecture, rather than a centralized architecture like a financial institution. The networks run on miner’s mining computers, rather than a bank’s data center - distributed nodes rather than centralized servers. The more miners there are, the more distributed the network becomes and the more secure, as a result. All of this makes malicious attacks like hacking and Denial of Service (DoS) very difficult for hackers to achieve.
Proof of Work vs. Proof of Stake
Some blockchain networks, like Ethereum, are moving away from mining and the proof of work model in an effort to combat the blockchain energy consumption problem. The new architecture is called “Proof of Stake” or POS. The goal of POS is very similar to Proof of Work - decentralization, transparency, consensus. But the approach is much different. With POS, miners are referred to as “forgers,” and like their mining counterparts, their role is to validate transactions on the network. Forgers are selected from a pool based on their holdings of a specific blockchain asset. The more they hold, the more they can forge. It is easier to validate a forger’s stake in an asset than it is to solve a complex mathematical equation (like in mining,) so there is no requirement for highly powered, specialized computers and the large amounts of electricity that they use. There is no block rewards in POS, instead forgers are entitled to the network transaction fee.
There are some inherent socioeconomic and security issues with the POS model that make it less than ideal to solve the blockchain energy consumption problem.
The Rich get Richer
One major side effect of POS is the 51% problem. Because participation in the network is based on how much holdings a forger has, those with the most holdings will have the most power. This creates economic inequality and disparity among asset owners.
In Ethereum’s journey to POS, early indications are that the minimum stake required to participate in network will be between 1250 and 1500 ETH. In today’s market that is equivalent to $1,750,000 - $2,105,000 CAD, pushing the average cryptocurrency trader out of eligibility.
The “51% Attack”
The aforementioned problem with POS, also comes with a security risk that is much more likely than in PoW models. The “51% attack” is when a group owns the majority of a blockchain network’s resources and can leverage that power to manipulate how the blockchain was designed to work, for their own benefit.
Making Mining Sustainable
As supporters of the PoW model, the Crypto Noob Club is dedicated to solving the blockchain energy problem the same way many other industries are. Renewable energy. We believe that tightly coupling and scaling demands in processing power harmoniously with supply in renewable energy is a solution with many use-cases where large amount of processing power is required.
Renewable Processing Power (RP ²)
We are currently testing our renewable processing power technology within the Crypto Noob Mining Club (CNMC) with the goal of reducing the club’s operational costs and increasing member profitability. In parallel to this we are building relationships within the renewable energy sector, identifying the right partners to help make our vision a reality. We hope to take our lessons learned and apply them to larger renewable processing power projects that we have in the pipeline.
For news and updates on our renewable processing power initiative, subscribe to our mailing list here.
The index is based on a number of assumptions that can be found here. Leading blockchain researchers have claimed that in order to have an accurate estimate of the Bitcoin network’s total energy consumption, an index would need access to hard data from Bitcoin miners themselves, which currently they do not.
The accuracy of the Bitcoin Energy Consumption Index is widely debated. ↩