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As cryptocurrencies continue to gain mainstream attention, concerns about their environmental impact have come to the forefront. Consumption of energy in blockchain, especially by chains that employ the Proof of Work (PoW) consensus, has sparked debates about sustainability in the crypto space. This article examines the energy efficiency of PoW mining compared to its alternative, Proof of Stake (PoS), and explores the implications for the future of cryptocurrency.
Bitcoin is the first and the most popular cryptocurrency in the world for which the PoW consensus mechanism was implemented. In PoW, miners try to solve a more complex puzzle than the other miners as a way of getting the notional right to include a fresh block to the blockchain network and also be rewarded with new coins. This process mined is quite computationally intensive and therefore, consumes a lot of energy.
According, to some news sources, Bitcoin’s annual electricity consumption is approximately 130 TWh, which is similar to Argentina’s or Norway’s electricity consumption. Such high energy consumption has led to criticism when it comes to the longevity of PoW-based cryptocurrencies.
Due to environmental issues, most of the newer pieces of work in the blockchain area have incorporated the PoS consensus model. Unlike PoW, PoS doesn’t involve growers as it doesn’t necessitate solving of complex problems. Rather, validators are selected to construct new blocks depending on the cryptocurrency that they put at risk.
PoS networks consume relatively less energy when compared to PoW-based networks. For instance, Ethereum changed from PoW to PoS, and that event called ‘The Merge’ caused a 99.95% drop in energy consumption. This reduction of power use has made PoS preferred over PoW because of the signs that it is less hostile to the environment.
As much as the energy efficiency of PoW and PoS are discussed, the divergence is quite clear. Overall, individual Bitcoin payment now is thought to cost roughly 707 kWh of electricity – enough electricity to power the average Indian household for 24 days. On the other hand, a transaction on a PoS network such as Cardano uses only 0.5474 kilowatt-hour which is slightly less than one light bulb.
However, the supporters of PoW argue that its high energy consumption provides unparalleled security and decentralization. They contend that the resource-intensive nature of PoW mining makes it extremely difficult and costly for malicious actors to attack the network.
Cryptocurrency operations have elicited controversy over being environmentally unsustainable in terms of power consumption. Some countries have completely outlawed the mining of crypto while others are tightening the laws concerning the mining of cryptocurrencies.
As a result, several crypto firms are looking for ways to make their operation environmentally friendly. There are enterprise miners who utilize renewable sources of energy like hydroelectric, solar or wind energy sources. Moreover, everywhere more and more people are trying to use the heat coming from mining rigs for something else, for example, for heating a house or a greenhouse.
Along with the development of the crypto industry, the dispute between PoW and PoS will likely persist. Although BTC still adheres to PoW, more than one and three hundred other tokens either started with PoS or plan to do so. The success of Ethereum in transitioning from PoW to PoS establishes that other major cryptocurrencies may also follow the path.
The comparison of the energy consumption of PoW and PoS showed that the latter consumes far less energy; PoS mining is far less detrimental to the environment. With climate change and energy emergence being a global issue, cryptocurrencies based on PoW are likely to be under pressure to decrease the impact on the climate.
Even so, PoW is still acknowledged as secure by many, though the sustainability issues might very well decide the future of this incredible industry. With the development of new technology and consensus algorithms, the sustainable proportions of security, decentralisation, and energy efficiency will be the main criteria for the adoption of cryptocurrency in the more sustainable-oriented world.
