In October 2008, when the financial crisis was in full swing, an anonymous individual or group under the pseudonym ‘Satoshi Nakamoto’ published a white paper on Bitcoin, a “peer-to-peer electronic cash system” that ended up disrupting the financial system and sparked the creation of an entirely new industry: crypto mining.
Considering that many people view Bitcoin as a commodity, similar to gold, it only makes sense that the process of generating new Bitcoins would become referred to as ‘mining’. In a way, mining is an incentive mechanism to reach consensus in the verification of transactions in a decentralized network. While crypto mining originated from Bitcoin, the system has spread quite widely across the blockchain space.
More than a decade later, Bitcoin keeps intriguing individuals and organizations all around the world, and has become one of the most popular financial assets. Nevertheless, criticism and doubts around Bitcoin and crypto mining remain. The most popular cryptocurrency is also frequently brought to the spotlight around its potential affiliations to money laundering, financing of terrorism and cybercrime, as well as the energy the mining process of its cryptocurrency consumes.
According to the Bitcoin Electricity Consumption Index of the University of Cambridge, the annual consumption of Bitcoin is currently estimated to amount to nearly 140 TWh. The United Arab Emirates (113 TWh) or the Netherlands (109 TWh) had a lower annual energy consumption than Bitcoin in 2020. Moreover, news outlets like The Guardian or BBC News reported on Bitcoin exceeding the energy consumption of further countries, including Ireland and Argentina. Within the last year, headlines like “Bitcoin Uses More Electricity Than Many Countries” in the New York Times or “Bitcoin’s growing energy problem: ‘It’s a dirty currency’” in the Financial Times were in no short supply.
Among the most popular quotes on the topic is Bill Gates’ statement in the New York Times in March 2021: “Bitcoin uses more electricity per transaction than any other method known to mankind, and so it’s not a great climate thing.” Not that this statement or the awareness of the issue would have prevented Microsoft from launching ION, a decentralized digital identity system, to run on the Bitcoin network.
🔗But why is Bitcoin mining so energy intensive anyways?
At the heart of Bitcoin’s energy-intensive model is the Proof-of-Work (PoW) protocol. Bitcoin mining, the process of creating new Bitcoins using PoW, requires solving complex cryptographic equations to receive the rewards associated with the creation of the next block in the blockchain. PoW is carried out by computers, known as ‘miners’.
In the early days, a simple computer was enough to mine Bitcoin. However, the difficulty of the mining algorithm increased as the network grew larger and more people started competing to earn the next block’s rewards. On average, it takes about 10 minutes to solve such an equation and to mine a new block. Today, Bitcoin mining has become a costly and elaborate endeavour – accessible only to large investors that can support powerful supercomputers – at the cost of local communities.
It’s only sensible that miners are beefing up their machines to increase their chances. In fact, the sector became so competitive that Intel created dedicated chips and specialized manufacturers for mining servers like Bitmain were established. With up to 3,250 Watts indicated by manufacturers, the power consumption of such devices averages 28,470 kWh per year if operated continuously. In comparison, the annual consumption of a freezer is estimated between 200 and 500 kWh per year.
Additionally, operating a single mining machine is hardly the way to succeed. The biggest Bitcoin miners have fleets of hundreds of machines in so-called ‘mining farms’, carefully maintained and constantly ventilated, to prevent them from overheating. Some of the largest, like Northern Data in Texas, have an energy consumption of 1 GWh per year, the equivalent of the energy produced by about 3.1 million photovoltaic (solar) panels.
In critical times where humanity is facing serious global challenges in relation to climate change and the collapse of biodiversity, we must rethink the basics of how to decentralize our world.
🔗Are there more energy-conscious solutions?
Proof-of-Stake (PoS) mechanisms have proven to be less energy intensive than PoW. With PoS, miners lock up (‘stake’) a blockchain’s cryptocurrency on escrow accounts to be granted mining rights. In exchange for this participation, miners receive an interest proportional to their stake as reward.
PoS-based blockchains are faster and much more energy efficient than PoW-based blockchains. However, the implementation of a PoS protocol poses its own challenges. For example, it is known for incentivizing hoarding, rather than utilization, and driving centralization. The mining industry is attempting to shift perceptions and move away from its climate-polluting, power-hungry image by powering large mining activities with renewable energies or by offsetting their emissions with carbon credits.
While this might sound great at first, it does not resolve the underlying issue of incredibly high energy consumption. Should we really allocate relatively scarce renewable energy resources to such energy-intensive endeavours? Or should we rather look for more efficient alternatives – considering we have all the technology to create more energy-efficient models from scratch – and then support what energy consumption remains with renewable energy?
🔗ThreeFold Farming offers a greener paradigm
ThreeFold Farming is a decentralized, energy-efficient and meaningful alternative to mining. ThreeFold Tokens (TFT) are minted whenever new Internet capacity in terms of compute, storage or network is added to the ThreeFold Grid by connecting computers, known as 3Nodes.
By contributing decentralized Internet capacity to the ThreeFold Grid, independent people and organizations called ‘farmers’ earn TFT in return – based on a Proof-of-Capacity (PoC) algorithm. PoC is autonomously carried out by ThreeFold’s extremely efficient operating system. First, Zero-OS scans the computer’s resources. Then the operating system registers the computing power and Internet storage on the ThreeFold Blockchain, making the resources available to the entire network – thereby creating a decentralized model for Internet capacity provisioning. The energy consumption of a 3Node can vary, depending on the amount of Compute Units (CUs) and Storage Units (SUs) it holds. “The average consumption for a Titan 3Node is around 26.71 KwH per hour”, says ThreeFold’s Alexandre Hannelas.
Farming supports the realization of an open-source peer-to-peer Internet free from centralized servers and authorities. Similarly to Bitcoin, the management of transactions and the issuing of TFT is carried out collectively by the network to create a decentralized Internet economy. In a way, what Bitcoin did to money, ThreeFold does to the Internet – while using much less energy.
“By using blockchain for what it’s good at and other pioneering technologies, such as peer-to-peer networking, to complement it, we built the most efficient Internet infrastructure in the world, and by far.” – Kristof de Spiegeleer.
Developing sustainable solutions for our planet is essential to ThreeFold’s ethos which puts our planet and people first. A famous quote, we love and frequently refer to at ThreeFold, is Albert Einstein’s “We cannot solve our problems with the same thinking we used when we create them.”
Our planet needs regenerative solutions at a large scale, and ThreeFold aims to deliver on our promise providing better solutions for our planet and people through our technology. Based on the ThreeFold Grid’s average energy consumption, we’re planting trees with our partner Take Action Global to offset the Grid’s carbon emissions three times in the form of Voluntary Carbon Credits (VCC). Our VCC system was implemented in the PoC algorithm, so every 3Node mints additional TFT to offset its own carbon emissions based on the power utilization of the individual 3Node per month. The process is fully automated and executed by the ThreeFold Blockchain.
ThreeFold’s global community of farmers is on a mission to regenerate our planet through the planet-positive ThreeFold Farming which supports tree planting and other impact initiatives by default. We’re on track to provide a planet-positive Internet and support our partners in their initiatives in fields like climate education, climate action and economic inclusion worldwide.
Farming is about so much more than crypto mining. It’s about building a better Internet and shaping the world we want to live in. Together with a community of like-minded people, we’re taking action for a better world.
If not us, who? If not now, when?