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  • When crypto was just starting out, you could easily mine some using a decent laptop or

  • desktop computer.

  • But as digital currency prices have soared over the years, a flood of large-scale

  • crypto mining operations like the one behind me have piled in, hoping to cash in on the boom.

  • Crypto mining requires a lot of power.

  • So much so that bitcoin, the world's biggest cryptocurrency, now uses up as much energy

  • as entire countries.

  • That has led to concern from policymakers about the environmental toll of cryptocurrencies,

  • with some countries, such as China, even moving to ban crypto mining.

  • So how did we get here exactly, and can the crypto industry clean up its dirty image?

  • To find out, I've come to Boden, a small military town in northern Sweden.

  • It's also home to a huge crypto mine run by Canadian firm Hive Blockchain.

  • That's where I met Johan Eriksson, an advisor at Hive.

  • He's seen first-hand how much power it takes to mine crypto around the clock.

  • 30 megawatts of installed hardware.

  • That's approximately in excess of 120,000 GPUs running 24/7.

  • Hive's machines use chips called GPUs to mine ethereum, the world's second-biggest cryptocurrency.

  • And, as you can hear, they're pretty loud.

  • So why does mining crypto use up so much electricity?

  • Well, it all comes down to three little words: proof of work.

  • Unlike traditional currencies, cryptocurrencies are decentralized.

  • That means the work of recording transactions and minting new units of currency is handled

  • by a distributed network of computers, rather than banks and other intermediaries.

  • To facilitate a payment on a crypto network, all of the participants, known as miners,

  • need to agree that the transaction is valid.

  • In bitcoin's case, the method of reaching this consensus is known as proof of work.

  • The reason that bitcoin, in particular, uses quite significant amounts of electricity is

  • because of the consensus protocol that Bitcoin runs on.

  • Kirsteen Harrison is a climate policy advisor for the crypto exchange, Zumo.

  • What that means is that essentially, a number of computers need to compete to solve cryptographic puzzles,

  • and that is what creates the bitcoin.

  • When someone finds a solution to a puzzle, the rest of the network checks to see if that

  • miner put in the required amount of work to do so.

  • If they're satisfied, the miner gets to add a new batch of transactions to the blockchain

  • and is rewarded with some tokens for their effort.

  • But just like mining for gold, the chances of discovering new crypto can be pretty slim.

  • In fact, the best way to improve your chances is with more processing power, orhash power.”

  • The higher the hash power, the more chances a computer gets to guess the right answer to a puzzle.

  • And as usage of the blockchain grows, the difficulty of successfully mining cryptocurrency

  • also increases, meaning miners are forced to use more power-hungry machines.

  • The whole point of proof of work is that it's the energy expenditure that secures the network.

  • Today, the process of creating new bitcoins consumes more than 130-terrawatt hours of electricity annually.

  • That's more than entire countries, including Sweden, which has a population of over 10 million.

  • This is proving problematic for global governments, who are under pressure to limit global warming

  • to well below 2°C, and eventually reach net-zero emissions.

  • Locally, we're getting quite a bit of support.

  • Towns, municipalities, local suppliers, definitely power producers, grid owners.

  • We're getting a bit of backlash from Finansinspektionen in Sweden.

  • Finansinspektionen is Sweden's financial regulator.

  • The government agency called on the European Union to ban crypto mining due to its huge energy usage.

  • I think regulating it and alleviating any worries the Finansinspektionen may have about

  • these kinds of assets would help a long way.

  • To address concerns around pollution from crypto mining, companies like Hive are increasingly

  • shifting away from dirty fossil fuels to renewable sources of energy, like wind, solar and water.

  • This Hive facility is powered by a local hydropower plant.

  • This region is renowned for its surplus of cheap, renewable electricity.

  • In the north of Sweden, 100% of the power is either hydro power-based or wind power-based.

  • So, it is 100% renewable.

  • More than two-thirds of Sweden has a large excess production of electricity, or the possibility

  • to produce a lot more electricity.

  • And what the crypto miners are doing here is they're utilizing that excess electricity.

  • China used to be the world's biggest crypto mining hub, home to between 65-75% of the market.

  • But since China banned crypto mining, the country's share of the bitcoin mining market

  • has plunged dramatically.

  • Bitcoin's backers had hoped this would make the cryptocurrency greener, with miners flocking

  • to less fossil fuel-reliant regions.

  • However, a peer-reviewed study released in February 2022 suggests China's crypto ban

  • has had an inverse effect: bitcoin mining got dirtier in 2021.

  • Zumo is a member of the Crypto Climate Accord, a private sector-led initiative inspired by

  • the Paris Climate Agreement that aims to achieve net-zero emissions in the crypto industry by 2030.

  • They're working on something called the green hash rate solution.

  • And what that does is it allows the source of electricity used in mining to be verified as renewable.

  • And there's quite a lot of trials going on with that at the moment.

  • If that's successful, then hopefully that will filter out to the rest of the sector.

  • But some activists believe steps to decarbonize bitcoin production are misguided.

  • Greenpeace and other environmental groups are calling for the bitcoin community to make

  • a change in the cryptocurrency's code to replace its proof of work mechanism

  • with something called proof of stake instead.

  • Proof of stake removes the huge computational cost of verifying new crypto transactions.

  • The technology is already being used by blockchains like cardano and solana.

  • And Ethereum is also planning to upgrade to a proof of stake protocol later this year.

  • If that does happen successfully, which at the moment, all the signs are looking good,

  • then that will reduce the electricity consumption of the Ethereum network by 99% or more.

  • That puts bitcoin in an awkward position.

  • I don't believe that there's an option to do away with proof of work, precisely because

  • not one single player has control of the system.

  • It's a peer to peer network, a trustless network, and no individual has control over it.

  • And for that reason, I don't think any of us can make a decision about what happens

  • with proof of work.

  • Ethereum's change to proof of stake also has implications for the future of ethereum miners,

  • such as Hive, although Johan says he's not worried by this.

  • There's been delays on implementing proof of stake so far.

  • And I think there's going to be more delays going forward.

  • So proof of work, for the foreseeable time is going to have its place.

  • So you're not worried about the future of Hive being at risk?

  • Not really.

  • In Sweden, it's running on GPUs.

  • And that has so many uses.

  • If power of proof of work goes away, then I mean, you could use these same facilities

  • for rendering, high-performance computing.

  • Even if it goes away, there's a good business for shifting the focus from mining to other

  • sources of income.

  • So, can crypto go green?

  • Well, with regulators closely scrutinizing cryptocurrencies' energy usage,

  • and climate change top of mind for global governments, the stakes couldn't be higher.

  • We know that we're a bigger user of renewable energy than most other sectors, because the

  • data that we do have suggests that at least 39% of electricity from Bitcoin mining is from renewable sources.

When crypto was just starting out, you could easily mine some using a decent laptop or

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Can crypto go green? We visit a mine to find out

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    Summer posted on 2022/02/15
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