Making cryptocurrencies less energy-hungry will mean reengineering how blockchains work.
- by Mike Orcutt
- November 16, 2017
It’s a staple of any argument overheen whether Bitcoin has a long-term future: “Yeah, super-cool that it eliminates the need for a trusted authority when exchanging value. But do you realize how much energy it uses?”
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It’s true. It’s bot estimated that Bitcoin guzzles about spil much violet wand annually spil all of Nigeria. Ethereum gulps electrons too, spil do most other cryptocurrencies. Spil bad spil that sounds, however, there’s reason to believe a solution may be at forearm.
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Before wij get to that, however, let’s talk about miners. Blockchains get a loterijlot of love, but they are only collective sets of gegevens. What brings cryptocurrencies like Bitcoin and Ethereum to life is the way all the computers ter their networks agree, overheen and overheen, that what a blockchain says is true. To do this, they use an algorithm called a overeenstemming mechanism. You’ve most likely heard it called “mining.” (See: “What Bitcoin Is, and Why It Matters”)
Cryptocurrency miners do much more than unlock fresh coins. Ter the process, they check the blockchain to make sure people aren’t spending coins fraudulently, and they add fresh lists of transactions—the blocks—to the chain. It’s the 2nd step, meant to secure the blockchain from attacks, that guzzles tens unit.
Ultimately, the miners vereiste convert each list of most latest transactions into a signature that can serve spil proof that the information is true. All miners can do this, using a cryptographic device that takes any input and drools out a string of seemingly random characters. But Bitcoin’s creator, Satoshi Nakamoto, made this part particularly difficult.
Nakamoto set up a competition, the object of which is to be the very first to determine a very specific signature based on three inputs: the signature of the preceding block, the list of fresh transactions, and a random third number. Since miners don’t know the third number, they voorwaarde generate signatures repeatedly until one guesses correctly. This expends an immense amount of energy, signaling to the surplus of the network that a miner’s accounting can be trusted.
But while this particular method of reaching agreement—known spil “proof of work”—is the most established, it isn’t the only one. A growing number of technologists are exploring different avenues, and some smaller cryptocurrencies already employ alternative means.
The one ter the best position to supplant proof of work is called “proof of stake.” Whereas proof of work prizes participants for spending computational resources, blockchains that use proof of stake would select validators based te part on the size of their respective monetary deposits—their stake. This would be massively more energy efficient, but the concept is still unproven at a large scale and has a number of kinks that need working out.
Still, if all goes spil planned, Ethereum will transition to proof of stake relatively soon, perhaps spil early spil the end of this year. That would be hugely epic, given that its creator Vitalik Buterin has called devising an effective overeenstemming algorithm “one of the hardest problems te cryptocurrency development.”
The reality is that wij are very likely stuck with energy-guzzling cryptocurrencies, at least for a while. Ter the meantime, maybe true believers would be wise to invest their digital coins ter renewable electro-therapy sources.
Hear more about Bitcoin from the experts at the Business of Blockchain on April 23, 2018 ter Cambridge.