Cryptocurrency systems which use blockchain technology are changing the way we bank. Not only is the system secure, it is decentralized which means that anyone can add to the blockchain and earn their own stakes in the cryptocurrency game.
In the long run, a shift to blockchain banking will mean the international finance system has a smaller footprint than the current fiat system as there will be no need to print currencies or support banks and all the transport, security and resources they require. Right now, however, the mining of cryptocurrency is working alongside the fiat system and it has a less than stellar environmental record.
Bitcoin alone currently uses around 73.12 TWh of electricity which is as much as the consumption of Austria. Energy costs account for 75.05% of profits, so miners tend to seek out areas where energy is cheap, and that means fossil fuel energy.
Why Does Mining Use So Much Energy?
Cryptocurrencies record all transactions in a ledger system through blockchain. Cryptocurrency miners solve a complex algorithm called SHA-256. If they achieve a solution and their “block” is chosen to add to the chain, they are rewarded with some cryptocurrency. The math performed to earn cryptocurrency is called “proof of work.” The fact that disparate users add to the blockchain is precisely what makes it so secure.
Initially, the SHA-256 algorithm could be solved by programmers using their excess processing power, but it has become so complex that it now requires computers enabled with specialized chips called Application Specific Integrated Circuits, or ASIC-enabled computers. These computers require large amounts of energy to run and remain cool, and things are only getting worse. Cambridge University’s Dr. Garrick Hileman writes, “Most cryptocurrency systems are currently using an energy-intensive proof-of-work (PoW) algorithm that serves as a lottery to determine which miner gets the right to add his block to the blockchain and earn a reward. When mining difficulty rises, a larger amount of electricity is required to generate a valid PoW.”
A Workable Solution
The extraordinarily high energy consumption of cryptocurrency mining, especially with its reliance on cheap coal power, is having a detrimental effect on the environment. GEAR Token has come up with a system that mitigates both high energy use and enormous overheads for a truly eco-friendly alternative to fiat financing.
The solution couldn’t be easier–renewable energy. As much as 40 percent of GEAR’s mining profits are reinvested to create renewable energy farms which it uses to power data centers around the world. Having a banking system that requires no brick-and-mortar branches, printing of currency, security, and anti-fraud departments has a much smaller footprint when running on renewable resources.
Not only does GEAR provide its own renewable energy, it is also helping to reduce its footprint by investing 10 percent of revenue in the development of more energy-efficient renewable technologies, computer technologies and alternative sources of recyclables.
A closed-loop system where mining operations generate their own energy from renewable sources not only results in a positive impact on the environment, it ensures mining operations remain viable and increase profits.
Nikki Fotheringham is an environmental journalist and campfire cooking author. She is the editor of Greenmoxie.com where she shares green-living tips and helps people to live a more sustainable life.