Increasing Energy Consumption By Cryptocurrency Mining

Increasing Energy Consumption By Cryptocurrency Mining

Bitcoin and Ethereum, the top two cryptocurrencies in the world have been heading up the ladder of popularity with an increasing value in the market. At the beginning of this year in January, bitcoin reached a whopping stage of 41,000 US Dollars, which was one of the highest market values. Due to its liability to changes and unpredictability of value, later it went down by ten thousand Dollars. 

The soaring prices of bitcoin and Ethereum in 2020 encouraged many to invest in bitcoin or buy ethereum in Pakistan as well as other countries. During the last year, a sharp growth of 300% and 400% was recorded for bitcoin and ethereum respectively.  

The rising interest of speculators and investors was seen in cryptocurrency due to increasing economic uncertainty. In an effort to generate profits quickly and efficiently, services like PayPal stepped up to create ease. Virtual currencies like bitcoin were allowed to be kept in the digital wallets of PayPal’s customers. Payments through bitcoin for bitcoin-accepting merchants were then enabled.  Although it was claimed to have more extrinsic value than intrinsic.

Energy Consumption By Cryptocurrency

It was noticed that bitcoin energy consumption was going up. To ensure security across networks, a consensus mechanism held the weight of dependency of blockchains in cryptocurrency. Bitcoin is based on an underlying technology called blockchain and works in a decentralized environment.

Some informational pointers about energy consumption of cryptocurrency are mentioned below:

Consensus Mechanism

Cryptocurrency mining requires setting up robust and high-power computer systems supporting a consensus method. The network contains miners competing with each other in solving mathematical puzzles. These puzzles are complex but once solved by a competitor, approval to add the latest block of transactions to the chain of transactions is then achieved. The first to solve the puzzle gets rewarded with network transaction fees and new bitcoins.

In this computer generated system, computers utilize high energy from energy reserves to generate their high power and efficient functionality. 

Single Bitcoin Transfer Energy Requirement

The energy consumption of a single bitcoin transaction was calculated to be as much as that utilized by an average American household in a single week. Within the span of three years, the demand of energy increased by threefolds. This inevitably generated a negative impact on global warming. According to a study by a blockchain expert, the energy required to run cryptocurrency mining for one year has reached a similar aggregate as that used by an entire country like Belgium.

Impact On Environment

A Bitcoin Energy Consumption Index was developed by a website that gave us some alarming estimates. With real-time data on the cryptocurrency energy consumption and environmental impact, it measured carbon dioxide emission for a single bitcoin transaction as 300 kg of carbon dioxide. Whereas the electricity required for this process is 633 kWh or in simple words, equal to that used by an American household in 21 days.

Despite that, an increasing rate of interest in cryptocurrency investment and production of cryptocurrency mining networks was noticed within the past few years because of its efficiency in digital currency transfer. Since cryptocurrency allows secure transactions with no centralization, it has gained much acceptance through different regions of the world.

Strategies for Optimal Power Consumption

Crypto-miners closely and carefully monitor the cost of electricity while they operate. It constitutes 60% of the operating costs. Therefore, crypto-miners are always looking for countries offering a lower price. In cooler temperatures, a lesser amount of energy is required for cooling of computer servers. 

China holds the position of being the largest hub for cryptocurrency mining but countries like Canada, Georgia, Sweden, Iceland and the US are among few which are racing to host more and more companies. 

It is said that if the amount of profit extracted through crypto-mining is large, market participants will be able to make better decisions to ensure suboptimal power efficiency of bitcoin network. Bitcoin and ethereum are few of the many cryptocurrencies operating throughout the world and the carbon footprint by each is something to be considered.

Considerations Before Cryptocurrency Exchange

Before buying ethereum in Pakistan or investing in bitcoin, energy consumption, legalization and the characteristic of volatility associated with digital currency are few of the bits to keep in mind. 

The tracing of transactions is not possible with cryptocurrency, making them a favorite payment method among many. However, the frequency of ransomware attacks was found to be increasing due to the misuse of this advantage. It is recommended to be well-informed about the risks and benefits when considering cryptocurrency.

Due to the fact that cryptocurrency requires an increased power consumption, some reservations are found among governments and crypto-miners. However, it’s only a matter of time until cryptocurrency enthusiasts find a solution to that as well. Electric power reserves, specifically from crypto-mining can be generated, utilizing methods that produce electric energy without harming the environment. 

Cryptocurrencies like bitcoin and ethereum are now widely traded in Pakistan as they continue to prove their worth in the international market. PKR2Dollar is a well-known ethereum exchanger in Pakistan providing easy and efficient services concerning cryptocurrency. Try us today for efficient exchange services.