The proof-of-work (PoW) mechanism is the basis of the entire mining ecosystem. This aspect is also very problematic for miners.
Bitcoin mining is almost as volatile as the value of the cryptocurrency itself. Mining may sound like an easy money-minting job but that may not be the case now. With the reduced value of some of the biggest cryptocurrencies in the world, mining might seem like a lucrative option. However, a new report has claimed that the energy costs have hit miners.
A new report by CryptoMonday.de has showed that Bitcoin miners are spending more than 75 percent of their earnings on electricity costs. This has resulted in significant carbon footprint which is damaging to our environment, a new report revealed on Tuesday.
As mining cryptocurrencies is an energy-intensive process, electricity bills are one of the major costs that miners have to incur. A recent study has shown that a single Bitcoin transaction consumes about 2165 kWh of electricity which a regular household in the US would use in 74 days.
“Factor in the roughly $0.14/kWh that an average household pays, and the magnitude of expenditure becomes evident,” according to the report from CryptoMonday.de.
“Bitcoin mining is central to the sustenance of the BTC ecosystem as besides enabling verification of transactions, it helps secure the network. The activity is so critical that the BTC network incentivizes miners in the crypto through the miners’ reward,” said Elizabeth Kerr, a financial content specialist.
The proof-of-work (PoW) mechanism is the basis of the entire mining ecosystem. This aspect is also very problematic for miners. PoW requires them to solve complex equations for a share of newly-mined coins.
“The equations require the use of specialized mining equipment with high computational power. The equipment consumes tons of kilowatt-hours (kWhs), ballooning the miners’ electricity bills,” Kerr informed.
This very model is also eating into the arguments going in favour of cryptocurrencies. The PoW model has also come under criticism for its environmental footprint and critics hold that it is a wasteful and unsustainable crypto for the universe. Some studies have shown that cryptocurrency mining has created carbon emissions equivalent to entire nations. One of the studies estimates that Bitcoin emits nearly 114 megatonnes of CO2 annually, a value comparable to Czech Republic’s consumption.
“Bitcoin is hardly mainstream, but it’s already registering a significant carbon footprint. That reality is what’s worrying its opponents. They claim that the broader adoption of the coin would significantly impact the global environment negatively,” Kerr noted.
The only way miners can counter the argument is by transitioning the to cleaner energy sources.