Crypto mining is the process by which new coins are created or brought into circulation. Through crypto mining, transactions are validated and added to a blockchain ledger. This concept, peculiar to proof-of-work-based blockchain networks, involves the use of powerful computers by miners to solve complex mathematical puzzles.
Hence, crypto mining is typically an energy-intensive activity that takes a huge amount of power from the grid. This makes it a controversial issue amongst environmentalists and crypto critics. However, market analysts point out that the energy consumption of bitcoin (BTC) is minuscule compared to that of traditional financial institutions.
According to data made available by the International Energy Agency (IEA), and quoted by Forbes Advisor, the banking system consumes over 200 terawatt-hours (TWh) of electricity annually, whereas bitcoin mining uses only 127 TWh.
While there is a big difference between the two figures, the energy consumed by bitcoin mining is nonetheless huge and raises concerns. Notably, the energy utilized in the bitcoin mining process exceeds the entire annual electricity consumption of countries including Norway and Sweden.
More so, Bitcoin uses 707 kilowatt-hours (kWh) of electricity per transaction, which is 11 times that of Ethereum. Unlike the Bitcoin network, which utilizes the proof of work (PoW) consensus algorithm to validate transactions, Ethereum uses the proof of stake (PoS) which requires less energy to operate.
How Does Crypto Mining Consume Energy?
Given that crypto mining requires the use of powerful computers, the process is capital-intensive and consumes lots of electricity. To evade these costs, hackers often resort to cryptojacking to illegally mine crypto assets.
Notably, the energy used to mine several cryptocurrencies such as bitcoin, is a function of a few inter-related factors. These includes:
- Mining hardware specifications
- Network hash rate: the combined rate at which all miners on a blockchain network are simultaneously guessing solutions to the puzzle
- “Difficulty” of solving the puzzle, which is adjusted in response to the network hash rate to maintain the target block rate of one block per 10 minutes
- Energy consumption by non-IT infrastructure, such as cooling and lighting.
The rising price of bitcoin, particularly as it rose to an all-time high of $69k in December 2021, drove its network’s hash rate and mining difficulty higher. This price surge also led to the development and deployment of more powerful and energy-efficient mining hardware.
Quantum Computing and Crypto Mining
Quantum computing is an emerging technology specially designed for solving problems too complex for conventional computers. Unlike classical computers, which use bits to represent information as 0s and 1s, quantum computers use qubits, which can simultaneously exist in multiple states.
While it is still an up-and-coming technology, it has the potential to revolutionize various industries, including the blockchain and crypto industry. A recent study by two researchers at the University of Kent’s School of Computing showed that the mining of existing cryptocurrencies including bitcoin could be done using quantum computers.
The study revealed that quantum blockchain miners provided massive energy savings, cutting their electricity usage by 90 per cent when compared with that of regular crypto miners. As mentioned, crypto assets that rely on the proof of work blockchain consensus algorithm perform computationally intensive calculations to produce new coins and certify transactions, at a great energy cost.
Can Quantum Computing Affect Blockchain Security?
It bears mentioning that there are severe concerns about it being a threat to current encryption methods, which have been dismissed by popular crypto mining centres. For instance, cracking the encryption that safeguards the Bitcoin network would require inordinate amounts of quantum computing power to be deployed together and controlled by a single entity that orchestrates the attack.
According to researchers at the University of Sussex, a quantum computer with 1.9 billion qubits of processing power would be needed to break into the Bitcoin network within 10 minutes. This would require hackers to deploy millions of quantum computers, a scenario that is highly unlikely for the foreseeable future.
Conversely, quantum computers have the potential to break these encryption algorithms. If one can develop a highly powerful quantum computer, one could potentially decrypt encrypted communications, access confidential data, and undermine the integrity of digital systems that rely on cryptographic algorithms.
How Do We Guard Against This?
To combat this threat, one possible approach is the development of quantum-resistant cryptographic algorithms. These algorithms could withstand attacks from both classical and quantum computers, ensuring the longevity and durability of cryptographic security even in the face of quantum computing advancements. Minus the perceived fears that have been dismissed by many, quantum computing does offer opportunities for the crypto industry to adapt and innovate.
Some environmentalists have begun voicing concerns publicly over the huge amount of energy consumed by mining. Due to energy costs —among other things — some newer crypto networks are in the process of moving from the proof of work mechanism to proof of stake, which is a less energy-intensive or less power-hungry technique.
Notably, proof of work and proof of stake are the two most popular ways of validating crypto transactions and securing blockchain networks. However, PoW typically requires miners to solve complex cryptographic puzzles — which can incur significant energy costs — before they’re allowed to propose a new block.
This high energy requirement translates to huge spending annually and has a notable impact on global carbon emissions, hence the emergence of quantum computers as an alternative.