Renewable Energy and Cryptocurrency – How Mining Coins Affects the Environment
Cryptocurrency mining is a complex process that can be very risky and expensive. It involves specialized computers and other equipment, as well as a lot of electricity – much of it from fossil fuels. The high cost of electricity is a major reason why many bitcoin miners struggle to make a profit and go out of business. It is also a big reason why the cryptocurrency industry is shifting toward renewable energy sources.
Crypto mining is how blockchain networks validate transactions on the cryptocurrency Bitcoin’s distributed ledger network. In addition to generating new coins, miners add the verified transaction to the blockchain and keep it secure from hacking or double-spending. The verification is done by solving complicated mathematical problems that are computationally difficult to solve.
Miners earn rewards in Bitcoin for solving those computationally challenging problems — known as mining blocks. As a reward for successfully mining a block, miners are awarded 50 BTC. But that is a low reward, since each block is mined at an ever-increasing rate of difficulty. To compete, miners must invest a lot in specialized computer hardware and power, as well as join a pool — similar to a Powerball club — that shares the rewards of mining with other members.
The competition for new Bitcoins drives energy use, as the miners employ specialized computers and other hardware that uses aluminum, copper, iron and silicon. But that technology is not very efficient and requires huge amounts of power to operate. And that power comes at a real price, not just for the mining companies but for consumers, businesses and the environment, says Christina Cogdell, a cultural historian who studies the relationship between energy, materials and design.
As Bitcoin’s value and popularity have grown, so too has its energy use. As a result, it is now the world’s most popular cryptocurrency by total trading volume, surpassing gold. However, the currency remains a controversial topic, especially in some countries. It is illegal in China, Russia and other parts of the world due to its decentralized nature, volatile values and association with criminal activities.
If you decide to start mining, you will need to get a wallet and download mining software. Then you will need to find an inexpensive source of electricity, as the cost of power is the biggest factor determining your profits. The goal is to earn enough from mining to cover your investments in the necessary hardware and power costs, plus a profit margin. This could be as little as $0.05 per kwh. You can increase your chances of making a profit by using more efficient mining hardware, paying lower electricity prices and joining a mining pool. You should avoid countries with unstable and inconsistent electricity supply. You should also consider whether your local laws allow you to operate a mining facility. You should also consult your tax advisor about the tax implications of mining Bitcoin and other cryptocurrencies. For more information, see Taxation of Cryptocurrency Margin Trading and Estate Planning and Cryptocurrency.