Bitcoin Mining: What it is and How it Impacts the Environment

What is Bitcoin Mining and How Does it Work?

The main premise of cryptomining is that miners essentially solve a very complex math problem through their computers to attempt to validate bitcoin transactions. The first person to solve it is the one who successfully verifies the group of transactions and receives the reward. The “block” filled with the group of the verified transactions is then added to the blockchain ledger, which is the technology that cryptocurrency is based off of. 

Unlike centralized currencies, because Bitcoin is decentralized and doesn’t have a central body running it, the process of crypto mining and cryptominers are necessary to ensure the validity of each transaction and security in general. Miners are the people who run this process, with the incentive of a reward in bitcoins if completed successfully. However, the chances of successfully verifying a block are 1 in trillions, so there is an extremely low chance of reward.

Now onto the process itself, very powerful computers with either a GPU or ASIC (application-specific integrated circuits) are needed to solve the complex math problems needed to mine bitcoin successfully. This process of competing to solve these math problems, is called proof of work. Essentially, miners compete to be the first to guess a number equal to or below the target “hash” number, which is a 64-digit hexadecimal. With trillions of numerical guesses possible, it takes immense computing power to perform this, and even more to be the first miner to get a correct answer. This only becomes more difficult as more miners join. In order to maintain the speed of each bitcoin taking 10 minutes to mine, the difficulty of the problem adjusts according to the time it took to solve previous problems. 

Once a miner successfully solves the problem, the block, containing the group of verified transactions, is also validated, and then added to the blockchain ledger. There, once enough blocks confirm it, it becomes a permanent part of bitcoin and open to all participants. Thus, this process of Bitcoin mining allows for new bitcoins to enter the circulation, because new bitcoin is “mined” every time a transaction is verified. 

How Does This Impact the Environment

As shown above, Bitcoin mining consumes a significant amount of energy. The huge computation power required to mine proof of work cryptos (like bitcoins) creates lots of electrical waste. Furthermore, mining facilities draw energy from the power grid, which often uses fossil fuels. Essentially, Bitcoin mining is highly dependent on the usage of fossil fuels, which are major contributors to global warming.  In fact, crypto mining in the US was responsible for  27.4 million tons of carbon dioxide (CO2) between mid-2021 and 2022.

What Does This Mean for the Future?

With a continuing rise in Bitcoin and other cryptocurrencies, their negative impact on the environment is bound to intensify. Bitcoin is showing no signs of changing its mining methods, but an alternation in this algorithm is essential for the green future of crypto. More sustainable and climate friendly ways of mining must be adopted in order to ensure the safety of our planet.