A century ago, coal mining powered the industrial revolution. Then came the extraction of oil, gas, and precious metals to fuel the growth of modern transportation, electrification, and computerization of our modern society. Today, there is a new type of mining gaining prevalency. It is not the mining of raw materials from the ground, but rather the virtual mining of bitcoins. This virtual mining, like traditional mining, can deliver real wealth to the digital miners. But where will this next mining revolution take us and how long can we ignore the impact on our planet?
Bitcoin Mining and Proof of Work
Bitcoin mining is not your typical mining operation with picks and minecarts; rather it’s the term dubbed to the virtual process of obtaining bitcoin. A “bitcoin miner” uses their computer to run a software algorithm called “Proof of Work” which I’ll explain in depth later, but for now just remember that energy goes in, and bitcoin spits out. Essentially, this is a way of
acquiring Bitcoin by paying for the energy needed to support the “Proof of Work” system rather than buying the bitcoin directly on the market. President Trump’s recent win in the 2024 election led to a 30% surge in Bitcoin’s value, leading to even more entrepreneurs looking at how to mine Bitcoin for a fraction of its market price.
Bitcoin mining embodies the spirit of laissez-faire capitalism. It operates in a low entry cost, unregulated market where price and demand are constantly in flux. What makes it even more intriguing is that Bitcoin mining is decentralized—it is controlled by the people, not any government or bank. This has allowed the sector to flourish globally, creating new economic opportunities and pushing the boundaries of what’s possible in digital finance. Nevertheless, as bitcoin mining continues operations, a tense debate surrounding its energy consumption grows ever more pertinent. The debate is over how to reduce the energy footprint of bitcoin mining and the key to understanding the conversation is “Proof of Work” and its green energy alternative,
“Proof of Stake.”
At the heart of Bitcoin mining lies “Proof of Work,” a relatively complex but crucial system. It involves verifying information—such as the balance in your bank account—by having millions of computers maintain a ledger. If someone attempts to alter your account balance, the Proof of Work system would flag the discrepancy by comparing it with the millions of other records, rejecting any false information based on the majority rule. This means the validity of Bitcoin’s entire structure is determined by miners, who can only modify the system if a majority ruled to do so, an almost impossible task due to the disunity between miners across the globe. Obviously, the reason miners are willing to contribute their computing power to this system is because they subsequently enter a lottery to win bitcoin in return. So, while on the outside this system looks just like energy in and bitcoin out, it’s actually constantly creating and verifying the bank records of everyone who holds bitcoin.
The downside, however, is that this revolutionary system requires massive amounts of energy. It acts similar to the 1849 Gold Rush because you have lots of eager miners digging and panning but only a few striking gold. All those who are mining without any profit are simply wasting energy on the system. As efficient as it is in ensuring decentralized and secure transactions, the environmental cost is something to consider in this rapidly evolving landscape.
Proof of Work vs Proof of Stake
Frankly speaking, the first time I heard about the absurd energy consumption of bitcoin mining rivaling that of entire countries, I doubted that this new monetary system was worth the environmental damage. I grew up in Oregon, a green state. Not recycling was considered heretical, and my mom would take 10 cents from my allowance every time I left a light on in the house. We were proud of our hydropower, and I understood the importance of caring for the planet that hosted us. Consequently, I was shocked when I first heard that the proof of work system that supports bitcoin mining demands a yearly energy consumption equal to 84 billion pounds of coal. In contrast, many new and old cryptocurrencies have swapped to a newer system called Proof of Stake, reducing energy usage by almost 99%.
Proof of Stake is similar to its predecessor but uses only a fraction of the power. This is because proof of stake simply has miners use their mined coins as leverage in the lottery instead of constantly running computations. It would be like instead of having a librarian constantly run through a library to make sure no books are out of place, they just go through one time and then close the library from any more readers. Obviously, this system is much more energy efficient, but it does increase vulnerability to tampering with the system. Nevertheless, it is widely considered superior. Ethereum, the world’s second largest cryptocurrency after bitcoin, recently made the switch from proof of work to proof of stake, basically eliminating all associated environtmenal concerns. Many people have proposed that Bitcoin should follow a similar path to Ethereum. However, that is highly unlikely to happen. Ethereum’s developers voted to make the swap. While there was a push to hold onto the proof of work, it wasn’t enough to persuade the majority of the developers. On the other hand, Bitcoin’s developers have sworn fealty to proof of work, and the miners are perfectly happy to keep making money. As long as there is money to be made, which recent growths in bitcoin’s value clearly show, these miners are going to keep doing what they do best until the earth stops rotating. While government intervention looked feasible before the election, President-elect Trump is a big supporter of Bitcoin and is unlikely to make any policy change that would undermine the cryptocurrency.
Bitcoin’s Future
Like Lightning McQueen in the most recent Disney Cars movie, bitcoin finds itself as the gas guzzler in an increasingly more efficient and greener world. However, it appears bitcoin mining is here to stay, and it’s up to us to find ways to make it compatible with energy conservation efforts. Since we can’t eliminate the energy consumption of bitcoin, we need to focus on how to make it clean. The most viable solution is grid stabilizing for upcoming nuclear power plants. Previously, nuclear power plants were something of a dying system because, while their carbon emission is superbly low and energy output is very high, the initial investment required to construct a plant can be in the billions and takes years to complete. Not to mention, the radioactive waste and past nuclear meltdowns have tainted the industry. However, this year, Amazon, Google, and Microsoft have all announced plans to begin using/building miniature nuclear plants to sustain their colossal-sized AI grid systems. This poses a unique situation for bitcoin mining to intertwine its energy consumption with that of these companies effectively feeding off of excess energy that would otherwise be wasted. So, while Bitcoin swapping to proof of stake is likely just a pipe dream, there are real and impactful changes we can make now to help our planet sustain our mining ambitions.
To research more in depth about grid stabilization and other green energy methods paired with bitcoin mining, see the links below:
