Up in the Austrian Alps, two hydropower mills have been started by a startup called HydroMiner that allows high power computers to stay operational round the clock. These computers draw in around 600 kilowatts of cheap hydroelectricity as they mine new bitcoins.
Mining bitcoins are an energy-intensive process and solving a mathematical process over and over again. It is a trial-and-error brute force method that allows cryptocurrencies to be secure in the first place.
There is no efficient version of this algorithm, you need to do computationally intensive mathematical operations repeatedly.
Cheap Fuel for Hardware
When you are mining for bitcoins, the largest drawback is the price of electricity. Many green activists are frowning upon bitcoins and other cryptocurrencies for their huge energy requirement.
According to Digiconomist, the energy use by the bitcoin network can surpass the earth’s total electricity requirement in a couple of years. That is essentially a big middle finger to the climate of our home planet.
We are essentially ruining our planet by mining for coins that really do not exist.
But people are using bitcoins. The value of bitcoins is proof that people are using it. And hence, more coins need to be mined.
With bitcoins, people do not need a third party for transactions. Money is transferred directly without a bank in between; the transaction is recorded in a ledger that is globally distributed across the bitcoin network. This is the blockchain technology.
Maintaining the blockchain requires a lot of energy too, but that’s a topic for another day.
The Proof of Work
Mining bitcoins are lucrative because of the Proof of Work concept. Miners need to maintain the ledger by adding blocks to the ledge once in every ten minutes and they are rewarded with a bitcoin.
The nature of this is competitive and hence the more computing power you have the higher is your chance of winning.
But this nature of incentive is also what is driving people to mindlessly burn energy to mine for bitcoins and get their prize.
Changing the Mining Strategy
One thing that bitcoin entrepreneurs think could help the industry is by getting their energy at some place better. People are looking at cheap energy for bitcoins.
Sometimes, they are also the dirtiest source of energy. Take coal, for example. Abundantly available in China, that makes electricity cheap but also look at China’s contribution to climate change.
Just like all industries are located at geographically strategic spots, mining can also be done in locations that provide easy access to renewable energy.
Consider Africa for example. Sub-Saharan Africa receives abundance of sunshine for solar power plans. Coastal regions of Europe can be used for generating tidal energy. Hydroelectric energy, in small scale, can power a lot of these computers.
Windmills are also a great way to power these computers. When it comes to cooling, some places in Siberia are so cold that the computers do not even require external cooling solutions.
Bitcoins can be mined efficiently, with clean energy, without causing harm to the environment. But that is not what is happening at the moment.