Nowadays, crypto miners are under pressure. Three of the largest crypto miners – Marathon Digital Holdings, Riot Blockchain, and Hive blockchain are all down more than 9%.
The falling crypto market can be the result of strong regulations on the mining industry. Up to now, most of these have come out from China and India. However, due to the environmental and sustainability concerns, it looks like the US government is also in a doubt.
Elizabeth Warren sent a letter to the CEO of Greenidge Generation Holdings, Jeff Kirt. In the letter, she was seeking information on the climate change impact of crypto mining.
Why crypto mining is a problem?
Over the past few years, many reports have claimed that bitcoin mining is consuming more and more energy with time and is getting out of control. For example, a report suggests that the bitcoin network will start using as much electricity as the entire world does today.
Crypto mining consumes a lot of energy. Many of the leading crypto blockchain networks require a proof-of-work mechanism. It is basically required to validate block on the blockchain and secure the network. For security purposes, heavy computation power is required to solve complex mathematical problems. Some of the biggest crypto mining networks such as Bitcoin, Ethereum, and Litecoin, use this proof-of-work protocols.
Is it really a problem for crypto miners?
Well, Bitcoin mining alone accounts for more than 0.5% of the world’s electricity usage. This electricity consumption is much larger than many small countries. Due to this fact of huge power consumption for mining, crypto miners have come into pressure, specially in countries like China. This is because of the cheap electricity available in such countries that is mainly derived from coal-powered plants. Due to such concerns, the U.S is also coming to a similar conclusion and questioning the applicability of crypto mining from an environmental point of view.
“In general, more than half of the bitcoin mining power consumption globally is in China now. And the Chinese Government, as well as others, have recently been catching up with miners to limit that by using industrial tariffs, which might be consuming lots of energy from the grid and increasing overall demand,” says Zula Luvsandorj, project finance advisor to the UK Cabinet Office.
Is there a solution for all crypto miners?
Nowadays, a number of altcoins and other new blockchain networks are being built on the proof-of-stake mechanism.
What is the proof-of-stake mechanism?
This type of mechanism allows the blocks to be verified with the help of token holders staking their tokens to become validators and secure the blockchain. This helps to cut down on the energy usage needed to run networks. Hence, it provides a more sustainable alternative to the existing validation models.
Proof of Stake (POS) was created as an alternative to the Proof of System (POS). It is seen as less risky in terms of potential for networks to attack the network. This is because it structures compensation in a manner that makes the attack less dangerous to the miners.
Notably, Ethereum is trying to adopt proof of stake model with its Ethereum 2.0 update.
However, in the current scenario, the crypto mining sector is consuming tons and tons of power. This is the main reason as to which crypto mining sector has again grabbed the attention of regulatory bodies.