According to Digiconomist’s Bitcoin Energy Consumption Index, a single transaction from the most popular cryptocurrency leaves a carbon footprint, like watching 138,762 hours of YouTube or 1.8 million Visa transactions. Over the course of a year, Bitcoin mining consumes an amount of electricity comparable to the total energy consumption in Sweden. At the same time, almost half of the country’s electricity is produced from renewable sources, and bitcoins are most actively mined in countries where most of the electricity is produced by burning solid or liquid fuels.
At the same time, the demand for electricity in the world continues to grow and its rates have now reached the highest rates in the last decade. This is one of the reasons why countries like China prohibit mining on their territory. In Kazakhstan, where many miners are moving after Chinese bans, a law has been passed introducing a surcharge for electricity for crypto farms. In Iran, where 4.5% of all bitcoins are mined, a mining ban was introduced due to the threat of a shortage of electricity. Some countries like El Salvador stand out – here they intend to use the energy of local volcanoes for the production of cryptocurrency.
In April, representatives of the crypto industry entered into a Crypto Climate Accords (CCA) agreement to come up with an acceptable mining solution around the world.
The currently used Proof-of-Work (PoW) mechanism requires mathematical calculations to get the result of the calculations. The problem is that at the same time many farms and numerous amateurs are engaged in calculations in the world, and there is only one winner in each case – and a huge amount of energy is wasted.
Proof of Stake (PoS) is an alternative mechanism first implemented in 2012. The share (Stake) is used as a resource that determines which system gets the right to mine the next block. In essence, the process turns into a combination of an auction and a lottery, and only the winners have to spend energy to solve a mathematical problem – transaction authentication. As a result, the PoS model promises to reduce power consumption by almost 99% compared to PoW.