Can Bitcoin survive without changing the way it is mined?
Bitcoin miners are one of the most crucial parts of the Bitcoin ecosystem. They create the blocks on the blockchain, the decentralized ledger technology that is the backbone of Bitcoin. When a block is added to the chain it is recorded on ledgers and stored on user’s computers all over the world. This means that once a transaction has been logged there is no way to change it. The blockchain is also impossible to cheat, which is why many people prefer Bitcoin to Fiat currency for online transactions.
How Bitcoin mining works
When a Bitcoin transaction takes place, there are 3 key elements at play to make sure the transaction can’t be duplicated. Firstly, there is the users public key, this is essentially their ID number. Secondly is the private key.his is your password, it’s incredibly important to remember this code. Lastly, each Bitcoin has its own code. All of these are just strings of random numbers. They are formed into an equation which miners solve to verify the transaction. When they solve an equation, they are rewarded with a portion of a Bitcoin.
The equations get more complex the more people are working on them. Since Bitcoin exploded, mining has almost become impossible for independent miners just working from home. The equipment is expensive, consumes a huge amount of electricity, has a tendency to overheat. It will probably be beaten to the punch every time by the large Bitcoin mining farms that have been popping up in the last few years. Large enterprises set up massive mining rigs using Application Specific Integrated Circuits ASICS– optimal for mining Bitcoin- in special thermally regulated data-centers in areas with cheap electricity.
How much energy does mining use?
Mining Bitcoin uses a vast amount of energy, last year it took 30.14 KW. If you don’t entirely comprehend how much this is, look at it this way: it took more electricity to mine Bitcoin last year than it took to power the whole of Ireland. Putting this further into perspective, each Bitcoin transaction uses enough energy to boil around 36,000 full kettles. If Bitcoin continues to rise popularity and value, more people will want to mine it. When more people start mining it will require even more electricity to keep Bitcoin going.
The huge mining farms mentioned above contribute to this greatly. They require massive amounts of computing power to stay ahead of the pack, solve the equations first and then get the rewards. This means that they also require massive amounts of electricity. If Bitcoin does someday become the number one global currency, as many of us hope it will, the monetary and environmental toll of the electricity used to verify transaction could be huge.
Of course, Bitcoin is in its infancy so there is still work to be done on it. If it does become a global currency, then the next major step in cryptocurrency technology will be a way to mine it in a more efficient way. If not, the whole network will reinvest almost all the Bitcoin mined right back into electricity consumption. Bitcoin is not the only cryptocurrency mined this way, but it is the most used cryptocurrency in the world so it handles far more transactions than any other cryptocurrency.
Does the current mining process need to be fixed?
Obviously as discussed above, the amount of electricity used to mine Bitcoin is a huge concern. Many fear that it will have lasting negative effects on the environment. When the world is already gripped by global warming, embracing a currency that requires so much power just to verify will be a problem for some people. As a whole, people are trying to move more towards energy conservation and embracing Bitcoin would be a step backwards in this regard. If Bitcoin is to become a globally accepted currency, then changes need to be made to the mining process.
Another issue is whether people will have any motivation to mine Bitcoin and verify transactions when all the Bitcoin has been mined. The rewards for mining halves every 4 years, and there is a finite amount of Bitcoin. The question is, will the transaction fees earned by mining be enough to motivate people to keep doing it? There is talk of subsidizing Bitcoin mining if it becomes an integral asset. However, this presents its own problems as it goes against the decentralized nature of Bitcoin.
With the creation of these giant, corporate-owned rig farms there is a worry among the Bitcoin community that it’s becoming too centralized. Bitcoin’s whole purpose is to be a currency that is not under the control of any banks, government or corporations. If mining becomes a completely centralized industry what the effect will be on the Bitcoin ecosystem as a whole?
As of now, mining is the only way to introduce new Bitcoins onto the market and verify transactions. Maybe one day will change. There are cryptocurrencies like Ripple that don’t use mining at all or others that use less complex equipment like LiteCoin. Bitcoin is the first cryptocurrency and there is still work to be done on it. These are just some of the issues that need to be addressed before it can truly overtake Fiat currencies as the one true, global currency.
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