People have many feelings about bitcoin.
One oft-cited example is that it uses more energy than the annual consumption in countries like Finland or Denmark — and that’s concerning in a world that’s already on track to blow past its climate goals, thanks in large part to fossil fuel emissions from energy consumption.
That problem is partly why Intel, one of the largest chipmakers in the world by revenue, recently unveiled Bonanza Mine, its first computing chip specially designed for mining bitcoin in an energy-efficient way.
While Intel may be one of the biggest chipmakers getting into the bitcoin game, other companies have for years been working on making their chips more energy efficient without any resulting drop in the energy used by mining operations.
Bitcoin, along with many other cryptocurrencies, works on a simple concept: Every 10 minutes, the bitcoin protocol — essentially, the code underlying bitcoin — generates a math equation with a numerical solution.
But as bitcoin grew in popularity and more people got into the mining game, the computing power needed to find the right numerical sequence grew as well.
The miners are promised they’ll get a certain amount of energy each month for a fixed price, and in return the utilities don’t have to worry about trying to account for energy demand from those mining operations fluctuating as equipment ages or mining rigs are taken on or offline.
So even if they’re using energy-efficient machines, there’s no reason for those miners to use any less energy than before, especially if the energy has already been paid for.
Late last year, a utility company in New York state drew criticism for converting a shuttered coal plant into a natural gas-powered plant that would supply energy to a local cryptocurrency-mining operation.
Proponents of bitcoin say the easy solution to this problem is to power mining operations with clean energy; some even go so far as to say crypto could help the environment.
The energy producers can get paid for energy that would otherwise go to waste, and the crypto miners are able to power their operations without fossil fuels.
The idea is promising, but it has limitations.
More people around the world are scrutinizing bitcoin for its energy use and impact on the environment, and investors who want to make climate-friendly investments are growing wary of it, Drake said.
Every few minutes, an algorithm selects someone to receive more of that cryptocurrency; the more of a cryptocurrency you have, the higher your chances of receiving even more.
This means that in order to participate in a cryptocurrency built on a proof of stake protocol, you need to be able to buy into that cryptocurrency using another currency, like dollars, euros, or even bitcoin — something that proponents of proof of work models like bitcoin say makes proof of stake unfairly weighted to favor the rich, whereas bitcoin, at least in theory, allows anyone with a computer to take part.
Ethereum operations around the world currently use as much power as the Netherlands, and the Ethereum Foundation estimates switching to proof of stake will lead to a 99.95 percent drop in the cryptocurrency’s energy use.
If ethereum makes the switch and those energy estimates pan out, it could have huge implications for the cryptocurrency world and the environment at large: Ethereum could become a model for creating cryptocurrencies that are also climate-friendly.
Proponents of proof of work, like Soluna’s Patel, say the energy consumed by bitcoin also secures it, as someone trying to steal bitcoin would need to use a tremendous amount of computing power to successfully hack the bitcoin blockchain.
In theory, that would allow them to unilaterally make decisions that affect all the users of the platform in a process similar to how shareholders with a majority stake in a company can influence the company’s decisions.
“I don’t think it should be one versus the other,” Patel said.
All these arguments over proof of stake and proof of work, however, may not get very far.
Cryptocurrencies are here to stay, at least for the foreseeable future, and while they may be digital, they will continue to have far-reaching effects on the real world.