Cryptocoin’s Proof Of Work should be banned
Full disclosure: I started a petition to ban proof of work: https://www.change.org/StopBurncoins
Investment in cryptocurrencies is increasing, and even though some win money, some lose, the overall trend seems to be n increase in value.
The major reason is, of course, that it is a completely unregulated market. Free from government control, but also free from oversight.
Win or lose, it’s all on you, which to many is a great promise in itself.
But are all coins equal? Some target art, others specific markets, other try to build ecosystem of financial investments… No, We’re talking about the underlying technology.
It’s well known that the two major technologies are Proof Of Work, and Proof Of Stake. Simplified, coins based on the PoW(Proof Of Work) are mostly first-generation cryptocurrencies, basing themselves on computer doing lots of expensive computation to keep the money alive. Coins based on PoS (Proof Of Stake) instead distribute the maintenance of the network not based on how much work your computer(s) can do, but on how much money your wallet has.
Bitcoin is the the most famous PoW coin, the one who started it all. It’s also the coin that has been studied the most, so we know really well all the drawbacks of this system, and what it entails. PoS coins are the second generation, designed to avoid the limitations of PoW. They have been studied and improved over time, and are now considered as safe as PoW, but much, much more efficient.
And efficiency is what I would like to talk about: PoW is like a huge lottery system that happens every X minutes (for bitcoin, every 10 minutes). Simplifying a bit, there can be only one winner every round. However, unlike normal lotteries you can print your own tickets and you can print as many as you want!
This sound awesome, just buy as many printer as you can, and have them print as many tickets as you possibly can! The more you print, the better your chances at being the winner. Unfortunately, the lottery starts from zero every 10 minutes, and you can’t reuse even a single one of your tickets.
You have to start printing all over again. And what happens to the old tickets? just burn them, the amount of money you get if you are a winner will exceed the value of the ink and paper by many, many times anyway.
And that is the crux of the problem, now. Bitcoin alone is (virtually) printing a ridiculous amount of lottery tickets (the process is called mining), and wasting more energy than Sweden, more than 160 other nations on earth. And of course it’s getting worse, because more people want to print tickets as time passes. So the old guys need to invest in more, better hardware! It’s a vicious circle.
Technically speaking Bitcoin never changed much from the old days, so instead of using algorithms like argon2, they are still using SHA. The difference is important, because with SHA you can do something that argon2 is designed against: You can buy dedicated ASIC hardware. That is hardware completely dedicated to do one specific computation over and over again, and can’t do anything else. Not even just slower, you just can not run anything else, it’s not a normal CPU. This enabled people to concentrate a lot of money on this system in the hopes of outrunning their competition. It also made normal computers almost useless next to them, so the computing power is not as well distributed as it was some years ago. But bitcoin main idea was that it was distributed?
Computers need electricity of course, and power still comes from fossil fuel. Bitcoin is using something like 138TWh per year to stay alive today. 65% of bitcoin mining happens in China (which really does not sound “distributed” to me), and 65% of China power is coal.
Let’s do a quick calculation on the amount of CO2 generated by pure coal for bitcoin:
Estimates from https://www.gem.wiki/Estimating_carbon_dioxide_emissions_from_coal_plants
1GW plant => 6.3M tonnes of CO2/year
65% of 138TWh ~= 90 TWh used in China alone
65% of 90TWh ~= 59 TWh of pure coal
1GW plant produces 8.76 TWh of power per year
=> In China alone, Bitcoin produces about 6.3*(59/8.76) = 42.4M tonnes of CO2
…Weren’t we trying to reduce the carbon footprint of humanity or something? Something about global warming, pollution or such? Every dollar of bitcoin value is estimated to cause health and climate damages in the USA for 0.49$ and in China for 0.37$: https://www.sciencedirect.com/science/article/abs/pii/S2214629619302701
That much power is of course also putting a big strain on the electrical grid, and we are hearing more often of cities that have blackouts due to too heavy mining.
All that hardware also has to come from somewhere, and while the companies are trying to increase production, we are a full year inside a computer chip shortage, with another year at least ahead of us. You can guess how mining is not helping, since everyone wants to mine something.
That looked like a lot of drawbacks, right? But what about that other alternative, PoS? PoS uses only the power you need to keep the computer on. For PoS your phone or a whole dedicated datacenter just for you makes absolutely no difference. All that matters is how much money you have in your wallet, and that’s it.
So why are we not using it? Inertia, fear of losing investment in hardware mostly. The good news is that most (if not all) new projects are all PoS, and some, like Ethereum are currently trying to switch to a PoS scheme. It’s delicate stuff, especially since you really don’t want to cause a ruckus, scare people away, and make other people lose money. But it is doable.
But unless the old, big, remaining projects witch to PoS (especially bitcoin), we will keep having problems with power consumption, availability of computer parts, environmental problems.
So what to do? Stop using bitcoin? Boycott it? No, no need. That would just make people lose lots of money and get angry. Projects can switch technology! Just ask that bitcoin and other switch to PoS! It will not be immediate, so the current investments in hardware can be repaid, and there will be no value lost.
PoS has all the advantages and none of the drawbacks of PoW. If we could push for legislation to ban PoW, then projects would take the time to switch to PoS, and everyone will go on like before. Still distributed. Still decentralized.
We started a petition for that, please read, sign and share: https://www.change.org/StopBurncoins
