Electricity used for the cryptocurrency mining in the world is above the electricity used by Iceland. However, when we compare cryptocurrnecy market to other markets, transaction volume is much lower. This electricity consumption will become unsustainable if digital currencies continue to grow at this current pace.
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High difficulty in mining
Bitcoin mining is set up so that every 2016 block, one block is completed in 10 minutes again. When more miners begin to mine, the difficulty grows in the same way. Thus the difficulty increases proportionally to the increase in the network’s processing power. The mining difficulties of both Ethereum and Bitcoin have increased exponentially since the day they first released. This trend will continue as cryptocurrencies become more and more widespread in the world.
The increasing difficulty of mining has forced miners to buy new and more durable mining equipments. An example of this is super-computers. The problem with supercomputers is that they are extremely expensive. Therefore, they can only be reached by people with solid financial resources. Mining is benefiting from scale economies that further limit the ability of small-scale miners to compete. For this reason, mining has been centralized intensively. AntPool is the largest cloud mining company, controlling 19.88% of the processing power in Bitcoin mining. Most mining companies are located in China due to low electricity and labor cost.
As the transaction rate of Blockchain network increases, the number of mining equipment on the market will continue to increase. Mining equipments consume a large amount of energy at the moment. We can only imagine how much electricity will be used if mining becomes more and more popular. The electricity that powers these machines is often coming from nonrenewable energy sources and causing climate change. The Austrian company HydroMiner is one of the few mining companies that are planning to make mining more sustainable and profitable using renewable energies. HydroMiner CEO Nadine Damblon said in an interview with CoinNoob that companies are using solar energy for mining, but hydroelectric power is probably the best solution to be more stable.
Every verifier in the PoS network owns a portion of the network. This is very different from the PoW method that each of the verifiers must have expensive mining equipment. The PoS also encourages further decentralization of the network. In addition, the PoS is not difficult to calculate, so it is very efficient and much faster. However, there are several disadvantages; The most important one is “nothing at stake” problem.
Supposwe that a network using the PoS system is under attack and the attacker has modified the network’s original Blockchain and placed its own. In both Blockchains, mining is profitable because it does not cost you anything. In fact, if the attacker succeeds, this is the wisest thing to do. With PoW, a miner should decide to mine in one chain or the other. Because mining equipments work with expensive electric energy. Blocks on Bitcoin are always verified via PoW. However, Ethereum is moving towards to PoS with the new “Casper” protocol. Soon, the Ether-owners will be able to earn money with smart contracts in exchange for transaction fees. Bitcoin mining in 2025 will be interesting.