The technology behind bitcoin, blockchain has a serious energy problem

Blockchain requires a lot of computing power and, consequently, a lot of energy consumption.

Photo: Fré Sonneveld / Unsplash

Since the concept appeared in 2008, blockchain – a database protected and stored in a decentralized network of computers – never stops expanding. Its initial goal was to enable existence BitcoinFirst cryptocurrency of the world. The problem is that it requires a lot of computing power and consequently a lot of consumption energy.

To solve this, new alternatives have appeared all over the world. One of the most recent was a major software update from a rival network. Ethereumwhich reduced electricity costs by about 99%.

Blockchain is a technology that makes it possible to record, send and receive information over the Internet, without the need for a bank or central authority to verify these transactions. It is on this type of network that digital assets such as Bitcoin are traded; NFTs (non-fungible tokens, digital representations of a thing, like a work of art); on DeFisexperimental forms digital finance without brokers or banks as intermediaries; and passes into metaverses.

“It’s a kind of digital ‘official log’: it gives independent and automatically auditable publicity to all the data you want to notarize,” explains Marco Carnut, blockchain expert at Zro Bank.

All participants in the system audit check and recheck the work of everyone else, so that every fraud attempt is timely detected and ignored. “In all cases, users are at the center of the process because they contribute to the security of transactions,” says José Lauro Jucá Neto, an expert on the subject.

Bitcoin uses a Proof-of-Work validation model, which uses computing power to solve complex calculations

Bitcoin uses a Proof-of-Work validation model, which uses computing power to solve complex calculations

photo: fdr

Evidence of blockchain data

Blockchain adopts digital “evidence” to prove any data changes, which also gives more security to the network.

They are the most famous proof of work (proof of work), which uses Bitcoin, which uses computing power to solve complex calculations, and Proof of stake (proof of participation), used by Ethereum, based on the amount of tokens that a node (a computer participating in the network) must confirm and receive fees for confirming transactions.

Additionally, blockchain is also the basis for countries’ digital currencies, CBDCs, created by central banks. “Not to mention the tokenization of real, financial and digital assets such as real estate, debentures, fund shares, carbon credits, artwork, music, among others,” adds Thamilla Talarico, partner at cryptocurrency consultancy EY. .

Metaverse transitions are one application of blockchain

Metaverse transitions are one application of blockchain

Photo: UK Black Tech / Unsplash

Energy is a big problem

High energy consumption is currently the weak point of this technology. It’s because of the way it works. To be added to the blockchain, blocks of data must be verified by “miners,” computers with programs that verify and record transactions on the block. “They perform two tasks: auditors and mints,” explains Carnut.

Miners audit transactions by finding a 64-digit number that ‘seals’ or ‘closes’ a block of data. The difficulty is precisely in finding the number, which in practice is the answer to an extremely complex computer math problem. Solving it requires a lot of computing power, which in turn consumes a lot of energy.

At the beginning of Bitcoin, it was possible to do this work with a regular computer or laptop. As the network expanded, the digital currency algorithm increased the difficulty of finding such a number. To discover this, people and companies acting as miners set up large computer “farms” to release new bitcoins into circulation (“mint” as a mint). It is the only way to release new cryptocurrencies onto the blockchain.

According to Carnut, today there are so many computers engaged in this task that they already consume 0.5% of global electricity, which is equivalent to the electricity consumption of countries like Argentina or Sweden.

To get around this, many miners are investing in sustainable ways of producing energy, such as solar, wind and geothermal, for example. Also, not all blockchains need a lot of computing power. “This energy-intensive model is an original feature of the technology when Bitcoin appeared,” says Jucá Neto

Currently, Bitcoin continues with this model. In the case of Ethereum, the network has completed its migration — called “Connection”, or “A Fusão”, in Portuguese” — for the Proof of Stake system, which uses other mechanisms and criteria that are not directly based on computing power and, therefore, do not consume as much energy.

Bitcoin is the inspiration for Brazil's future Real Digital cryptocurrency

Bitcoin is the inspiration for Brazil’s future Real Digital cryptocurrency

photo: fdr

Is it the road of no return?

Regardless of the energy problem, blockchain is still hailed as the future of the economy, as it can enable tokenization (digitization of assets) and future cryptocurrency Real digital in Brazil.

The President of the Central Bank, Roberto Campos Neto, recently stated that the country has made good progress towards a more integrated and digital financial system. It started with Pixa, it passes open finance and will arrive in Real Digital.

The Brazilian Federation of Banks (Febraban) sees this trend positively. Through its press office, the entity announced that today digital technology enables transactions to be faster and with a higher level of security. “So tokenization of the economy is a natural path as new technologies mature.”

+The best content in your email for free. Choose your favorite Terra Newsletter. Click here!

Leave a Reply

Your email address will not be published. Required fields are marked *