It’s been a volatile year for the cryptocurrency sector, to put it mildly. The industry has faced unprecedented levels of scrutiny, scandals, and bad press thanks to high-profile fraud and financial missteps such as the collapse of the FTX crypto futures exchange and crypto-based hedge fund and the subsequent indictment of its now-infamous co-founder and CEO Sam Bankman-Fried.
While most of the buzz has since blown over, the industry remains under a regulatory microscope, and many companies are still tangled up in litigation. Just this month, The Securities and Exchange Commission sued two crypto firms in two days because of alleged misconduct: Binance, the world’s largest crypto exchange, is accused of operating an illegal trading platform in the United States and misusing customer funds, while Coinbase, the country’s largest crypto platform, failed to register as an exchange, a legal requirement.
But crypto seems to have survived its dark night of the soul and come out the other side with a surprising rebound. In fact, as Bitcoin prices have surged in recent months, so too have mining operations – and their associated carbon footprint. Despite all of the industry uncertainty, Bitcoin’s carbon emissions are currently at an all-time high, using nearly the same amount of energy annually as the entire nation of Austria, according to the University of Cambridge’s Bitcoin Electricity Consumption Index. And that staggering energy footprint will almost certainly continue to balloon as the proof-of-work problems become more and more complex for miners to solve.
Bitcoin’s shocking energy use is a result of the cryptocurrency’s mining process, which relies on a public ledger powered by the blockchain. In order for Bitcoin transactions to remain secure, authenticatable, and anonymous, each entry to the ledger is achieved through solving complex computational problems, a process known as “proof of work.” The ‘miner’ who solves this puzzle fastest receives a newly minted Bitcoin in return for their efforts. “Proof of work” is a process of pure trial and error – plugging in random solutions and hoping to hit it big. This means that high-power super-computers, which can make more calculations in a shorter time, have an advantage.
But to keep the currency from being devalued as more and more miners mint new coins, solving for proof of work gets harder and harder according to the level of competition. By design, mining one Bitcoin always takes about 10 minutes. As a result, Bitcoin miners constantly have to use more and more computing power, and often have entire warehouses full of supercomputers working away. The result: the same amount of Bitcoin produced annually, but with constantly increasing energy use and carbon emissions. In 2009, you could mine Bitcoin using just a few seconds’ worth of household electricity; now, you would need to consume about 9 years’ worth.
But there may finally be a solution to this compounding problem: quantum computing. According to recent reporting from CoinsPaid Media, quantum computing-based systems have been modeled to be “vastly superior to classic mining equipment in terms of energy efficiency.” This finding is based on a study conducted by researchers at the University of Kent in the United Kingdom, who compared the energy consumption of three different quantum computers when mining cryptocurrencies using the blockchain.
The resulting potential energy savings are staggering. “We show that the transition to quantum-based mining could incur an energy saving—by relatively conservative estimates—of about roughly 126.7TWH, or put differently, the total energy consumption of Sweden in 2020,” the study states. And, unlike traditional mining equipment, which is already extremely advanced in its technology, quantum computers are still in their nascency and will likely become more refined to be even more energy-efficient in the near future.
However, this discovery has some important caveats. “Quantum mining is only energy efficient when using equipment with about 512 qubits,” explains CoinsPaid Media. “Meanwhile, the most powerful quantum processors available on the market, the IBM Osprey and D-Wave D2, have only 433 and 512 qubits, respectively.” More importantly, quantum computing just isn’t that evolved yet, and will have a long way to go before it can feasibly achieve these kinds of savings. Quantum computing may save the climate from Bitcoin, but it won’t be soon. And the timeline to avoid the worst impacts of climate change is a short one.
By Haley Zaremba for Oilprice.com
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