Much of the bitcoin community is acutely aware of the environmental toll that mining takes. Large, energy-intensive data centres and cooling systems gobble resources and spew heat into the atmosphere while throwing e-waste in abundance.

As a result, the industry – which has seen a parabolic growth curve – must drastically change its current course if it wants to be a part of the global financial system. Bitcoin Magazine spoke with some experts on this subject and found out that more than just money at stake here – preserving the environment for future generations is also a key consideration.

A Bitcoin Mining Primer

In simplest terms, a miner collects transactions from around the bitcoin network, bundles them into a block, and then works on solving a computationally difficult puzzle. 

The first miner that finds a solution gets to add the resulting block to the end of the blockchain and claims a reward in the process. 

In the early days of bitcoin mining, miners used off-the-shelf personal computers and did not have a massive environmental impact. The problem is that the number of bitcoins you can mine with a PC is not profitable.

One way of thinking about mining profitability is considering the cost of electricity relative to how much mining power it brings. At the time of writing, if we take into account that most miners pay 15 cents per kilowatt-hour and use around 1000 watts for their entire operation – including their equipment, cooling, and everything else – this means the cost per bitcoin (or per satoshi ) mined equals roughly $600. Not even close to profitable at today’s exchange rates.

So, unless you have access to highly cheap electricity prices, mining bitcoins with a standard computer is not an option. Massive warehouses full of application-specific integrated circuit (ASIC) computers that are designed only for mining, on the other hand, do produce some profit. Moreover, these chips can achieve energy efficiency between 100 and 200 times better than a PC.

Bitcoin Magazine recently covered the move away from renewable resources by Chinese bitcoin miners. One of the highlighted tenants of this transition was that electricity in China is very cheap, thanks to a surplus of hydropower and nuclear energy. In some cases, mining businesses utilize renewable resources such as wind turbines to help power their facilities.

How does bitcoin’s cryptographic technology help save the environment?

A few projects out there aim to use bitcoin’s cryptographic technology without the need for mining. In these proposed systems, so-called miners still solve cryptographic puzzles, but they do this for free and in their spare time. This is done by using specialized hardware designed specifically for solving these cryptography problems (such as FPGAs or ASICs). 

Moreover, these “miners” do not form an oligopoly (like miners do now) but rather compete against each other. For this reason, there is no need to incentivize mining with block rewards; the system instead relies on transaction fees exclusively. This model would be much more resource-efficient than what you have now.

The first example of such a system is Hashcash, proposed way back in 1997 by Adam Back. The main idea behind hashcash was to fight spam emails. However, this initial proposal was not optimal for bitcoin purposes, as it required participants to have access to reasonably priced electricity for the mining process. 

Later on, Wei Dei extended hashcash by making it very lightweight and using a series of cryptographic assumptions rather than relying on the underlying computational work.

Dei’s anti-spam proposal was excellent, but it still had a significant flaw: anyone had no incentive to run the hashcash computation. This resulted in miners either running their mining hardware sporadically or not running it at all. 

A recent paper proposed creating incentives for miners to run hashcash and propagating their results. This allows us to remove the need for expensive hardware by following signing-based proof-of-work (SBPoW).

The idea is simple: participants broadcast signed messages containing hashes of the (previous) hashcash puzzles they solved. These signed messages can be used to verify that participants spent computational resources. This means miners do not need any special hardware once the system is set in motion; it will work even on a smartphone or a very lightweight device such as Raspberry Pi.


Finally, cryptocurrency researcher and developer Sergio Demian Lerner proposed a different way of deriving provable computations from hashcash. His approach, however, still requires the same level of trust as the original proof-of-work model.

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