The Decoupling of Cryptocurrencies Is Progressing! Environmentally Friendly Mining
This post may seem unnecessary to people with no interest in cryptocurrency, but please stay curious and give it a read.
To understand why countries are needed, it might help to understand how money came to be. I believe that a country is an organization invented to make it possible to do things one person can’t do alone. The role of the state is to collect taxes widely and fairly and control them in order to solve the problems of a group (society) made up of individuals. When there were no states, we bartered.
When a country developed and created its own currency, it became possible to buy things, and an economy was born. The money collected from everyone was used to construct things like roads and hospitals, and the state was entrusted with certain powers so that it could protect the lives and livelihoods of the people.
Although this was sufficient within one country, there was then the issue of how to handle exchange with other countries; how could the value of money be shared, or how should accounts be settled when goods are bought and sold across country lines? Currency is no more than paper or coins created based on trust. If trust in a country drops, so does its currency’s exchange value. If a country is strong, its currency’s value increases, too. In the 21st century, we are an increasingly cashless society, with physical coins and paper being exchanged for digital data.
Against this background, in January 2009, a new type of money was created: cryptocurrency. What was so new about cryptocurrency, you ask? The fact that it is not made by a country. As mentioned previously, currency may appear to be made from paper and coins, but it is actually made of “trust.”
Cryptocurrency was born from the question, “So, can the private sector create currency without a state’s seal of approval?” That cryptocurrency was created following the Lehman shock and is experiencing increased popularity in the current coronavirus money glut can be seen as evidence of its demand in times when state-created currencies are shaken.
Cryptocurrencies are established on the trust of many people (through a process called mining). As they can cross international borders at low cost, they are an incredibly practical tool in 21st century society. Now let’s look at the cryptocurrency slump of the past few weeks.
This March, a new digital artwork using cryptocurrency (by artist BEEPLE) sold at auction at Christie’s for ¥7.5 billion. This led to a rapid increase in cryptocurrency values. For example, Ethereum (ETH), which follows Bitcoin (BTC) as the second most circulated cryptocurrency, tripled in value from ¥160,000 on March 1st to ¥470,000 on May 12th (and is at ¥260,000 today…).
This short term crash stems from the words of Tesla’s Elon Musk. Some months ago, values increased when he said it would be possible to buy Tesla cars with cryptocurrency (BTC), then crashed the moment he halted sales, citing cryptocurrency’s global environmental impact. This then dragged down ETH’s value as well.
This has caused sudden panic among those who took up cryptocurrency this year, but I want you to judge based on cryptocurrency’s full history. In the 12 years since its birth, it has seen a slew of violent fluctuations, but in the long term it has ALWAYS been going up.
Let’s look at things from a fact based perspective. How much electricity does it take to make BTC, and how much is it destroying the planet? Cryptocurrency relies on a process called mining. While “mining” usually refers to the extraction of valuable materials from the earth, in cryptocurrency, it refers to the act of creating a new block and obtaining cryptocurrency as remuneration. This process requires huge amounts of electricity. Bill Gates has even said that cryptocurrency becoming a key currency would double the rate of our planet’s destruction.
However, according to Cambridge University’s Bitcoin Electricity Consumption Index, BTC miners only account for around 0.6% of the world’s electricity consumption. This means that the BTC economy has the same carbon dioxide emissions as a small developing country like Sri Lanka or Jordan. ARK Investment Management’s research also revealed that BTC’s energy consumption is less than 10% of that needed for the traditional banking system.
Still, there is no doubt that cryptocurrency production requires electricity. That’s where this kind of venture comes in! BTC mining venture Gryphon Digital Mining has raised $14 million (¥1.5 billion) to make mining using only renewable energy possible.
Their press release states that they are able to produce electricity at the incredibly low cost of ¥1.43 ($0.013) per kWh. To explain what kind of unit price this is…:
The cost to produce 1kWh of electricity in Japan is ¥27 ($0.245). In inexpensive countries like Kyrgyzstan and Mongolia, it is ¥10 ($0.09). Sure enough, renewable energy is cheap, and not just for cryptocurrency!
Additionally, it’s not the case that all cryptocurrencies waste huge amounts of electricity.
For example: If we imagine that
BTC = the Burj Khalifa, the world’s tallest skyscraper (829.8m), found in Dubai in the United Arab Emirates,
Ethereum (PoW) = the Leaning Tower of Pisa (55.86m)
Ethereum (after PoS) = about as tall as a screw
PoS will be 10,000 times more eco-friendly than PoW.
By the way, PoW and PoS are consensus mechanisms used to confirm whether or not transactions on the blockchain are fraudulent.
…Perhaps I got a little too technical.
Regardless, our planet’s globalization won’t stop.The digitalization of currency (cashless society) is progressing rapidly.
People around the world are aiming for a carbon-free society. Both cryptocurrencies and car manufacturers will probably function on renewable energies. With that considered, I think it’s best to look at this phenomenon from a more macro perspective.
Let’s try to find the facts hidden behind every news headline.
By the way, this is BEEPLE’s work💰
Bitcoin’s History Explained in One Simple Table! Easy to Understand
Price Trends Elon Musk orders a halt to bitcoin car payments, Bitcoin drops on the tweet | TechCrunch Japan
Bitcoin Mining Venture Raises $14M for All-Renewable Energy
Mining Electricity Consumption Reductions of 99% After Migration to ETH 2.0? The Ethereum Foundation’s Research