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Introduction to the Bitcoin Mining System: Does Bitcoin Mining Have an Impact on the Environment? Cryptocurrency mining actually consumes less electricity than printing legal currency. As of now, the number of Bitcoin transactions per day is as high as 150,000-400,000. As the difficulty of computing power on the Bitcoin network increases, the issue of mining’s impact on the environment has become more prominent.

Introduction to Bitcoin Mining System

The Bitcoin mining system refers to using computer hardware to perform mathematical operations on the Bitcoin network. Miners who provide services during this process can receive a reward. Since the number of tokens issued is calculated based on the tasks completed by miners, mining competition is fierce.

Bitcoin mining began with low-cost hardware such as CPU or GPU. However, as the difficulty of Bitcoin computing power increases, Bitcoin mining activities now mainly rely on ASIC mining machines. These mining rigs require large amounts of electricity to operate.

Electricity Consumption Forecast

According to statistics, Bitcoin and Bitcoin Cash currently consume approximately 70 terawatt hours (1 terawatt hour = 1 billion kilowatt hours) per year. This means that the Bitcoin network requires more electricity than the entire countries of Switzerland and the Czech Republic consume. Some people believe that Bitcoin’s electricity consumption will be equal to global electricity consumption in 2020. But Morgan Stanley (International Finance Corporation) said: "It is wrong to look at mining power consumption linearly, because this industry will also develop new hardware and conduct a series of practices to improve energy utilization so that it can be more competitive. Advantages." This phenomenon has also occurred during the rapid development of industries such as cannabis cultivation and data operations, they added.

Energy Trends

Bitcoin miners are looking for areas with cheaper electricity, and renewable energy can bring lower mining costs. As we all know, China is rich in coal resources. If the proportion of renewable energy in China increases, it will have a greater impact on the Bitcoin mining industry.

Research shows that China will achieve renewable energy electricity production costs lower than fossil fuels by 2021. This means that by 2021, more miners will join Chinese mines.

How big of an impact does Bitcoin have on the environment?

Many media believe that Bitcoin has a great negative impact on the environment. However, compared with the legal currency system, the energy consumption of the Bitcoin production process is not high.

Fiat cash operation requires a huge infrastructure. In the United States alone, more than 6,000 banks handle cash transactions. For non-cash transactions, they rely on third-party service providers (such as Visa, MasterCard) and banks (such as JPMorgan Chase) to process payments. To compare with the energy consumed by Bitcoin, the amount of resources consumed by these companies and their hundreds of thousands of employees should be included.

Bitcoin is a peer-to-peer financial network. Due to its decentralized nature, transactions can be conducted without the need for a third party. A can send $100 to B, and the transaction information will be broadcast to all mining pools. The miners will record the transaction as a data block. In return, the miners will receive incentives in Bitcoin and transaction fees. This trading system is much more efficient than the huge legal currency network, so cryptocurrency mining consumes less electricity.

Should Bitcoin change its consensus protocol?

Some developers have called on Bitcoin to change the POW consensus mechanism to a POS proof-of-stake mechanism. Cybersecurity and Bitcoin expert Andreas Antonopoulos believes:

For other public chain networks like Ethereum that need to process large amounts of data per second to support large-scale distributed applications, the conversion from POW to POS (Proof of Stake) is very necessary. But for a network like Bitcoin, which is just a store of value network, switching from POW to POS is not necessary.

Conclusion: The Bitcoin POW mechanism cannot accurately predict future electricity consumption, but the banking system is also difficult to calculate. It is very likely that a new industry will emerge in the future that will allow us to better track the energy consumption of the financial system. In fact, the biggest impact of Bitcoin mining on the environment is to promote the establishment of distributed power plants, which changes the structure of existing power plants and accelerates the development of the renewable energy industry.