Big profits and environmental damage.. Bitcoin mining is more complicated than you think
A miner must have access to a low-cost, fast, and unlimited internet connection, and need inexpensive electricity supply because crypto mining rigs operate 24 hours a day and consume large amounts of energy.
The total market value of Bitcoin is about $1.03 trillion, roughly equal to that of electric car giant Tesla. And if the world’s first digital currency turns into a recognized corporate entity, it will become the sixth most expensive company in the world.
And in a report he published Intersting Engineering website (interesting engineering), writer Robindra Brahampat says that Bitcoin does not need factories like Tesla cars, but is mined like gold, but through computers.
Bitcoin is a decentralized cryptocurrency, that is, not affiliated with any government or institutional financial body, and its miners use specialized computers to solve complex cryptographic problems that are used to verify transactions and add them to a database on the blockchain known as a “distributed ledger.”
Bitcoin mining method
Each block consists of a number of pending transactions, and once a miner solves a cryptographic problem, it announces it to others in the network, then other miners validate the solution.
If enough miners give their consent, the block is added to the ledger, and then the move to the next block. A new block is inserted into the blockchain with each verified entry, and the miner receives a certain amount of bitcoin as a reward.
Bitcoins minted according to this mechanism become part of the currency database, and this process is known collectively as Bitcoin mining.
Each miner tries to be the first to come up with a 64-digit number known as the “hash” number, which is responsible for encrypting the data from the block. Transactions within the blockchain use the hash number instead of data, which provides confidentiality and security for buyers and sellers.
Each block contains a header made up of the version number, timestamp, the hash used in the previous block, the Merkle root, the number that miners are looking for, and the target value of the hash.
To encrypt the data and complete the hash, the miner must find the private number, which is a series of random numbers. To do this, miners use an algorithm to cycle through all possible solutions until they find the right one. Finding this special number is called “proof of work”.
Once the special number is found, it is added to the hashed contents of the previous block, and then re-hashed. If the new hash is less than or equal to the target value in the header, it is accepted as a solution, new bitcoins are minted and given to the miner, and the block is added to the blockchain.
In order to earn the reward, the miner must be the first to provide a hash less than or equal to the target hash. Because fragmentation involves performing a large number of functions very quickly, it requires computers with a massive processing power.
The computers used for this purpose are high-powered mining hardware, which can cost tens of thousands of dollars and consume huge amounts of electricity.
In order to increase their chances of being the first to find the target hash, miners pool their computing power into groups and then split the mining reward. Most mining operations currently occur in this way, and this raises fears of a monopoly of mining by specific groups.
Low supply and higher profits
The writer points out that the supply of Bitcoin is limited like any other commodity, and its creator, known as “Satoshi Nakamoto” – whose true identity has not yet been discovered – has set the maximum number of coins at 21 million units.
A recent report revealed that 90% of bitcoins have already been mined, and the algorithms are designed in such a way that the last of the remaining 10% will not be issued before 2140.
The writer adds that the reward that the miner gets from Bitcoin is not fixed, but rather decreases by half every 4 years. In 2009 the miner was getting 50 bitcoins for every fully verified transaction, but now he gets 6.25 bitcoins, and the reward will drop to 3,125 in 2024.
Despite this, the return on mining operations has greatly improved due to the rise in the price of Bitcoin in the past two years. In 2010 the price of 50 bitcoins was $0.04, today the value of one coin is more than 35 thousand dollars.
The author explains that anyone who has basic computer skills can become a miner, and does not need advanced skills and knowledge of coding techniques, but in turn needs a sophisticated computer to meet the high processing requirements.
The miner must also have the ability to access a low-cost, fast and unlimited internet connection, because during digital mining it needs to upload and download a huge amount of data, and it also needs an inexpensive electricity supply because crypto mining rigs operate 24 hours a day and consume large amounts of data. great energy.
The writer asserts that the large amounts of energy needed by Bitcoin mining raise doubts and fears about the extent of the negative impact on the environment. A study published in the Columbia University Journal of Consilience concluded that bitcoin mining consumes 121.36 “terawatt-hours” of energy annually, which is more than the annual electricity consumption in countries such as Argentina and Belgium.
The study reveals that 61% of the energy consumed in mining is generated using non-renewable resources, such as coal and natural gas. The increased use of non-renewable energy sources in mining operations could negatively affect global efforts to reduce carbon emissions.
Some research warns that bitcoin mining and other related activities could worsen global warming, increase industrial water consumption, and deepen the planet’s e-waste problem.