Bitcoin has rewarded investors with impressive gains for over a decade. It proved a reliable source of income for miners, traders, lenders, HODLers, and other types of cryptocurrency investors who adopted well-developed strategies.
There are more ways to profit from emerging bull runs, but placing orders on cryptocurrency exchanges is generally preferred for investors who want complete control over their assets.
For this reason, there are more ways to invest in Bitcoin depending on the provider chosen, and similarly to Visa, transactions don’t pose environmental issues because they don’t consume energy.
If you want to conduct direct Bitcoin transactions with other users and remove the presence of any intermediary, you can buy Bitcoin P2P on a P2P marketplace. You can enjoy security, and depending on the available crypto exchanges in your country, you may also find one providing zero fees.
Needless to say, Bitcoin has been held in high regard due to the advantages and opportunities brought to the financial system. However, it has also got a lot of flak for its power-greedy mining mechanism and the strain put on the environment.
The unfavorable headlines in the press related to the leading cryptocurrency all point in one direction: Bitcoin’s need to turn green. Because it consumes significant amounts of electricity, environmentalists are advocating for modifying its code to end the era of using energy-intensive mechanisms to add blocks to the chain.
Bitcoin is struggling to follow Ethereum’s footsteps, which succeeded in transitioning to an environmentally-friendly consensus called proof-of-stake and removed mining from the equation. Ethereum phased out mining. But what is Bitcoin waiting for, and why hasn’t it achieved this goal so far?
Bitcoin energy consumption debunked
For those not well-versed in the nuances of Bitcoin mining, the first step to gaining a glimpse into the coin’s greener future is to make sense of its creation process. The amount of electricity used to enable currencies to enter circulation is a trade-off for blockchain’s decentralization and security.
Mining Bitcoin or other cryptocurrencies relying on proof-of-work mechanisms is a process that requires high computational power to solve complex mathematical equations that enable transaction validation, ultimately introducing fresh blocks to the chain. The GPUs, CPUs, and cooling systems that maintain an optimum temperature for the mining rigs are the principal sources of electricity consumption. Indeed, these lead to increased energy usage and hefty electricity bills.
However, the good news for everyone who advocates for a greener future is that there are ongoing efforts to achieve a more environmentally-friendly process, proven by the increased use of improved mining algorithms and sustainable energy resources.
The case for Ethereum is different
Compared to Bitcoin, whose white paper is praised for serving as inspiration for the cryptocurrencies that followed suit, Ethereum’s case stands out. Bitcoin employs one set of miners and developers. On the other hand, Ethereum was created to overcome its limitation and provide a smart-contract platform for DeFi apps, with non-fungible tokens, cryptocurrencies, and other projects built on top of it.
Ethereum’s co-developer intended for the distributed platform to use proof-of-stake, but it would’ve taken too long, and some pundits deemed it an impossible dream. Thus, he decided Ethereum would use proof-of-stake until he chipped away at its limitation. The platform’s transition to the sustainable proof-of-stake mechanism took seven years.
Many significant projects on Ethereum had publicly supported its migration to proof-of-stake for the many benefits provided over the initial mechanism, including lower transaction fees. With Ethereum’s transition, a new world opened up, enabling the development of all the projects people are witnessing today as Ethereum phased out mining.
There has always been a risk that individuals who gained Ethereum by mining it would develop a competing chain relying on proof-of-work. However, despite attempts, none of them gained traction, and the energy-friendly version triumphed.
Renewable energy resources are more prevalent in Bitcoin mining
There’s a heated debate about whether Bitcoin can switch to the proof-of-stake mechanism, and opinions are split. Therefore, it is hard, if not impossible, to tell when and if the transition will occur. For the foreseeable future, it will settle with using renewable sources.
Several bitcoin mining plants still rely on non-renewable energy, but the fraction that uses renewable sources to power operations is expanding and taking up more space. Likely, increasingly more miners will switch to sustainable methods as wind and solar energy become more cost-effective alternatives to fossil fuels.
Let’s take the case of the Q4 of 2022. According to the Bitcoin Mining Council, almost 60% of the electricity consumed by Bitcoin mining used renewable energy sources, which is a critical milestone compared to the 36.8% approximated in the first quarter of 2021.
Nowadays, it’s recognized that over half of Bitcoin mining uses renewable energy sources, like geothermal, wind, hydro, and solar. The increased use of hydroelectricity and other sources is prevalent mainly in areas abundant in them, like Iceland and Quebec. Additionally, to power their operations more cost-effectively and environmentally consciously, some companies invest in sustainable initiatives, like wind and solar farms.
Bitcoin miners as energy purchasers
Bitcoin miners have two options to fuel their operations sustainably. They either use their renewable energy systems, become energy buyers or buy electricity from energy producers like independent power providers or utility companies. The latter is the way for the more significant fraction of Bitcoin miners.
In several cases, large-scale miners tend to sign long-term contracts with energy providers that enable them to use a more reliable energy source, thus being able to plan their strategies and budget in advance.
By setting up and using their renewable energy systems, they win on more fronts, including cheaper bills, boosted revenue, and peace of mind knowing they’re contributing to environmental efforts.
Bitcoin is garnering investors’ interest again as it has proved its resiliency in the face of the collapses of central banks, seemingly trustworthy crypto, and cryptocurrency exchanges. However, it must undergo several changes in order to gain activists’ sympathy urging for unimpactful mining processes, and more consideration must be directed at transforming it into a green cryptocurrency that aligns with sustainable efforts.
Ethereum phased out mining article and permission to publish here provided by Mary Hall. Originally written for Supply Chain Game Changer and published on June 21, 2023.
Cover image by Miloslav Hamřík from Pixabay