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| Fig. 1: This image shows one of the many Bitcoin mining farms, consuming extraordinary amounts of energy. (Source: Wikimedia Commons) |
Blockchain is a revolutionary technology that allows for secure and decentralized transactions around the world, removing the need for third parties to be involved. Blockchain was originally created in an effort to create a stable global currency, which is now called Bitcoin. [1] The technology is a distributed ledger and every node (data miner) has a copy. In other words, with the use of thousands and thousands of computers worldwide, bits of data are distributed between data miners computers, who are awarded small bits of Bitcoin in return. Putting the information on many different computers ensures that the ledger cannot be hacked, as a hacker would have to hack every computer the information is stored in. [1]
The blockchain technology has expanded into many different spheres, essentially any realm that involves information storage. Cryptocurrency is currently is the biggest use case for blockchain. Cryptocurrencies such as Blockchain have been a hot topic for some time now and it is no secret that in the future, the technology will only become more and more vital to our society. With all of these changes, there is sure to be a major shift in humankind's relationship with energy.
Blockchain can be a huge solution for the current, outdated energy grid, one accommodates energy from non-fossil fuels while smaller renewable energy sources are left out of the equation. For example, Bitcoin could allow renewable energy suppliers to sell directly to consumers through smart contracts, instead of being forced to go through banks or larger energy companies. This would remove all the wait time between the creation/consumption of energy and the electricity producer's payday. It often takes 60 to 80 days for the renewable energy producers to get their money. Theoretically, using blockchain you could buy energy on a need to need basis. This new grid system is essential in integrating renewable energy from sources such as windmill farms or solar panels in to societies' everyday enrage usage. Experts expect that, assuming this transition happens, 57 percent of global energy will be coming from renewable energy sources. [2]
The major con of the blockchain revolution is the massive amount of energy usage needed to keep cryptocurrencies running. Data mining is unfortunately an essential component in the success of cryptocurrency, serving a role similar to that of the federal reserves in stabilizing and expanding the dollar. The larger the computer system working on mining the tokens, the more likely that a Bitcoin will be found. And the larger the system working on finding Bitcoin, the more energy used. Bitcoin mining involves finding the answer to arbitrary math problems before other systems can and earning a token (the equivalent of thousands of dollars) as a reward. When Bitcoin was first released, laptop computers engines sufficed, but now, with the increased competition, one needs entire server farms to have a shot of mining a bitcoin. An example of these massive mining farms can be viewed in Fig. 1. Millions of tokens have been mined, and the mining of one single digital token uses two years worth of electricity in a household. In fact, Bitcoin's total energy consumption rivals that of Mexico's. Ethereum expends more energy than Denmark does. The amount of energy spent on a daily basis via data mining is tremendous, and it will only grow as cryptocurrency becomes more prevalent and a more viable. [3]
Blockchain will play an important role in the future of humanity, likely assisting the inevitable globalization of the economy and resources. Electricity can be instantly bought and consumed via blockchain for the first time in human history. Furthermore, one day, a cryptocurrency such as Bitcoin could be the universal currency, used by every country and individual. Experts are currently working on ways to decrease energy consumption, but none have been fruitful so far. There is little doubt that such a solution will be found in the future.
© Daniel Halper. The author warrants that the work is the author's own and that Stanford University provided no input other than typesetting and referencing guidelines. The author grants permission to copy, distribute and display this work in unaltered form, with attribution to the author, for noncommercial purposes only. All other rights, including commercial rights, are reserved to the author.
[1] C. Pop et al., "Blockchain Based Decentralized Management of Demand Response Programs in Smart Energy Grids," Sensors 18, 162 (2018).
[2] N. Popper, "There Is Nothing Virtual About Bitcoin's Energy Appetite," New York Times, 21 Jan 18.
[3] D. Tapscott and A. Tapscott, Blockchain Revolution: How the Technology behind Bitcoin and Cryptocurrency Is Changing the World (Portfolio, 2016).
