In January 2018, Cryptocurrency market has crossed the $700 billion mark in terms of market size. Majority of people become familiar with cryptocurrency in the last two years.
Individuals can earn cryptocurrencies in different ways. One of the simplest ways is to buy them from a brokerage which allows users to purchase cryptocurrency of their choice using a credit card, PayPal account or via any other kind of service. In the same way, exchanges exist, where various cryptocurrencies can be exchanged for fiat currencies. Here, both the systems are simple, hence they are well-known among investors and general customers.
Cryptocurrencies are not only available via online exchanges or brokerages. One can use mining rigs to earn them slowly. For mining, one requires advanced computer systems which can solve difficult math equations to produce cryptocurrencies.
Mining is most of the times disregarded, however, it has a great impact on the environment. Experts state that Bitcoin operators, for instance, consume 1-4 gigawatts of electricity which is parallel to the output of 1-3 nuclear reactors.
Some of the people also assert that Bitcoin utilizes the same amount of energy as required by country Singapore or it is electricity to power 4.5 million houses. Reliability of these claims is difficult as there is no fool-proof data on how much energy actually Bitcoin operations consume. Blockchain industry depends on high energy usage, however, there are some ways to reduce further damage.
How does Cryptocurrency mining works?
In order to start mining, one uses a node. This is a particular computer made only for solving hashes, which are hard mathematical equations. Software for crypto mining is available online and one can easily download it.
Equations are mainly the pending transactions that are grouped into blocks. The first person which solves the equation will be rewarded with cryptocurrency. As one block is solved, all the other computers are notified within the network so that they begin with the next block. This is also known as blockchain.
These equations are kept into a string of characters called hash. All the nodes estimate at random what these numbers are until it’s solved. The time it takes depends on bandwidth, computer, and other factors.
Cryptocurrency mining and Environmental factors
Cryptocurrency operations are probably consuming 1% of electricity in the US. Having only 1-2 nodes suggests that not many coins are mined. Hash equations require a long period to solve and most of them are not successful. Due to this, there are professional miners which operate thousands of processors, or mining farms. Hence, miners solve the issue by investing in various computers. To keep these systems properly, miners use very high-speed internet connection. Also, Mining rigs are operating 24 hrs to enhance the chance of producing cryptocurrencies.
Please note, mining setups require a high electricity and leave a large carbon footprint. Mining computer networks require big space, hence miners purchase buildings or farms to store them. Hence, miners require more computing power and high electricity, this will grow carbon footprint continuously.
A Carbon credit system as a solution
A Carbon credit is a permit which allows a business to emit a certain amount of carbon emissions. The permit can be exchanged if the maximum emissions are not surpassed. This came into existence to encourage carbon-friendly energy practices.
In case, carbon credits are used for trading on blockchain firms, it also forms an economic incentive to adopt them. This will decrease the carbon footprint and also becomes the second source of revenue. When more businesses in blockchain industry trade them, the requirement will start to increase. The increase in the adoption will enhance access to carbon credits.
Many people are unaware about carbon credit in crypto space. It is probably a $52 billion market and consists many barriers to entry for business owners who want to apply. It is fully centralized and governed by brokers. In addition, there is no proper information about how carbon credits are purchased and used.
A system can be made which connects blockchain industry’s carbon footprint and also allows accessing carbon credits easily. The system should make the process of acquiring carbon credits easy and also provide benefits to promote its usage.
Green sector parties can be nominated as authority nodes to look after trading and use of the credits. Ledger which is used for carbon credit should be transparent to increase traceability.
Lowering blockchain’s carbon footprint
Blockchain industry is getting exponential growth due to cryptocurrency mining. When more people are ready to invest in computers and setups, they earn cryptocurrency for profit. Moreover, the process requires great electricity and leaves a considerable carbon footprint.
In order to control this, blockchain industry should use carbon credit trading regularly. This system will reduce emissions obtained by mining and other activities.
Green sector companies can help to implement the best service, however, a transparent ledger helps accountability. Its benefits should attract more businesses to utilize carbon credits. Thus, permitting developers to use apps and technology will enhance its development and normalization.