Blockchain: An Energy-Hungry System that Needs Clean Power

By Tom Elowson, Data Center Specialist on March 06, 2018
Tom Elowson
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One of the fastest growing and least understood technologies today is blockchain, led by its most popular use case, Bitcoin digital currency. The underlying system behind blockchain, which The Economist explains as “a shared, trusted, public ledger that everyone can inspect, but which no single user controls,” seems poised to alter many things, starting with the financial system and the way people use money. Hype aside, the myriad applications of what seems to be secure online technology for transactions encompass money, trade, the Internet of Things (IoT), and much more. Big tech companies like IBM and Oracle already offer extensive platforms to take advantage of blockchain transactions.

Unfortunately, Bitcoin, the payment system that has catapulted this technology onto the world stage consumes a disproportionate amount of energy and is already stressing electricity grids everywhere. The energy required to “mine” Bitcoins is also contributing to greenhouse gas emissions that have government officials worried around the world. Transformative technologies, such as blockchain, should not have to be constrained by energy.

Is Bitcoin the new coal when it comes to greenhouse gas emissions?

Dirty Mining: A System Whose Integrity Depends on Processing Power

Blockchain is a system that applies cryptography and makes transactions transparent to all. This foundational transparency provides the trust necessary for transactions of all kinds. In an article aptly titled, “The Trust Machine,” that published in 2015 when Bitcoin was starting to take off  (priced at $250 vs $11,700 as of last week), The Economist explained how this technology is based on the “unexpected fruits of cryptography,” where “mathematical scrambling is used to boil down an original piece of information into a code, known as a hash. Any attempt to tamper with any part of the blockchain is apparent immediately—because the new hash will not match the old ones. In this way, a science that keeps information secret (vital for encrypting messages and online shopping and banking) is, paradoxically, also a tool for open dealing.”

The energy problem posed by Bitcoin lies in what is referred to as “mining,” which lies at the heart of the cryptocurrency and makes it secure. Mining is basically the process that creates Bitcoins. It is too complex to explain here, but just as Central Banks print money following a process to ensure it is real, Bitcoin “miners” create Bitcoins though an energy-intensive process that rewards them for spending days to “keep the blockchain consistent, complete, and unalterable by repeatedly grouping newly broadcast transactions into a block, which is then broadcast to the network and verified by recipient nodes,” according to Wikipedia. As a result of the time-consuming process that takes a lot of computing power, “the successful miner finding the new block is rewarded with newly created bitcoins and transaction fees.”

In short, as the BBC explained, “the computers that do this validation work receive small Bitcoin rewards for their trouble, making it a lucrative exercise, especially when done on a large scale.” In fact, the effort required to mine a Bitcoin is so big, and the rewards so attractive, that one of the biggest reasons to hack computers all around the world today is not for ransomware. It is to use their processing power to accelerate this mining without users even noticing their computers were hijacked, known as cryptojacking.

Just last week, Wired reported that Tesla and Radiflow, an infrastructure security firm that monitors and controls a water utility in Europe, were both recent victims of sophisticated cryptojacking campaigns. According to Wired, “Enterprise networks, and particularly public cloud platforms, are increasingly popular targets for cryptojackers, because they offer a huge amount of processing power in an environment where attackers can mine under the radar since CPU and electricity use is already expected to be relatively high.”

Dirty Money: An Environmental Problem that Needs a Clean Solution

Grist recently reported, “The stupendous growth of the virtual currency Bitcoin is creating real-world consequences. Massive number-crunching computer facilities for mining Bitcoin have popped up in parts of the planet where renewable electricity comes especially cheap. And now it looks like this mining is starting to siphon green energy away from everybody else.” The same week, the BBC ran an article headlined, “Bitcoin Energy Use in Iceland Set to Overtake Homes, Says Local Firm.” The article pointed out, “This year, electricity use at Bitcoin mining data centers is likely to exceed that of all Iceland’s homes.”

The problem in Iceland is energy supply, not carbon emissions, as the country’s electricity grid is powered by thermal energy. In other countries, Bitcoin mining creates added stress on the system and carbon emissions, especially in places like India or China where most of the electricity comes from fossil fuels. Blockchain technology will continue to grow in the future, even if the Bitcoin hype bubble bursts (as some fear). This means that the only way to solve the energy problem that this new technology creates is to increase the supply of sustainable energy everywhere.

The good news is that the world has an unlimited amount of clean energy potential. From the traditional sun and wind renewables to the practically unlimited hydrogen in water, to using the thermal energy inside the Earth (as Iceland does), and even harvesting energy from waves, clean power sources are increasingly available. The challenge is to ensure that renewable energy grows on par with blockchain so that the promise of secure, frictionless transactions for all kinds of industries does not become a nightmare for utilities and the environment.

Clean Energy, Accelerated

When it comes to matching clean energy to the growth of blockchain applications, like Bitcoin, our limitation is technology. Happily, it seems the technology for harvesting clean energy will continue to grow exponentially. The focus needs to be on accelerating these technologies, so human progress is never constrained by the supply of energy, nor the availability of clean energy that is good for our environment.


Photography courtesy of Christopher Michel.
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