Bitcoin, the world’s largest cryptocurrency, has crossed $30,000 for the first time since June 2022. Higher prices mean higher energy consumption. It is a good time to think about changing the way bitcoin transactions are verified.
To unlock new coins, bitcoin uses a proof-of-work system, in which complex mathematical puzzles must be solved to validate transactions. As prices rise, miners devote more power to the calculations. The Cambridge Bitcoin Electricity Consumption Index calculates that greenhouse gas emissions from bitcoin mining last year fell amid a price crash. Even so, it estimates that annual emissions of 48.35 MtCO2e (mn tonnes of carbon dioxide equivalent) were equal to that of Nepal.
This year, emissions are likely to rise. Ether, the second-largest digital token, shows how things could change. Last year, the ethereum blockchain shifted to a proof-of-stake system in a move known as “The Merge”. Users with ether now validate transactions and earn rewards in the process. The move has reduced energy consumption by more than 99 per cent.