Cryptocurrency is one of the fastest-growing segments in today’s economy. Recently, cryptocurrency has breached the sixty-two thousand dollar mark. According to Merriam Webster, cryptocurrency is any form of currency that only exists digitally, that usually has no central issuing or regulating authority but instead uses a decentralized system to record transactions and manage the issuance of new units, and that relies on cryptocurrency to prevent counterfeiting and fraudulent transactions.
This system makes all transactions decentralized meaning there is no interference from your bank or any central authority thereby helping us evade the tax deducted by our bank or card company for transactions we make, It comes with an additional advantage of helping us cross international borders at ease. It is the first decentralized peer-to-peer payment network that is powered by its users with no central authority or middlemen.
The first cryptocurrency ever invented was bitcoin, this was created by an anonymous person or group of anonymous people going under the name Satoshi Nakamoto. Today there are many active cryptocurrencies available making them easily accessible to all.
The first transaction made was on May 22, 2010, Laszlo Hanyecz paid 10,000 bitcoins for buying 2 Papa john’s pizza which today is worth more than $80 million this day is now known as bitcoin pizza day this was the first transaction made in bitcoin
In a historic move the president of El Salvador, Nayib Bukele, has declared Bitcoin as a legal tender and announced that the country’s government would grant citizenship to people investing three bitcoins in the country’s economy.
Recently companies such as PayPal and Tesla have come into the picture propelling bitcoin’s growth. Tesla has invested US$1.5 billion in bitcoin. Recently, Tesla’s CEO Elon musk was in SNL where he called dodge coin a hustle that resulted in plummeting of the value. It nearly lost 1/3rd of its price after the show. This exposes the volatility of digital currency.
For anyone who uses bitcoins, they are nothing more than a mobile app or computer program which is involved in the transaction of money. But behind the scenes, bitcoins share a decentralized ledger called block-chain which has information of all transactions ever done, and anyone can process these transactions with the help of a computer program and earn some bounty and this is called mining. Mining is the process of spending computing power to process transactions, secure the network, and keep everyone in the system synchronized together. It is fully decentralized with miners operating from every place and with no one being fully independent.
For every 10 minutes the entire bitcoin network holds a lottery, you enter into the contest by doing a very hard mathematical problem. The only reason people solve the problem is to prove that they have spent some power doing this and this is what they call “proof of work” in the bitcoin world.
You get paid 6 bitcoins which is approximately 200,000 dollars if you win the 10-minute lottery. The probability of a person winning the lottery is directly proportional to the amount of energy spent by the person. So,200,000 dollars’ worth of electricity is spent every 10 minutes by miners, and with mining of bitcoin being a very easy process( you require a computer with an internet connection to start mining and as there are already many huge mining farms with sophisticated technologies out there, the probability of we being able to cut is very minimal with the computers we use in our home). The count of people involved in mining the bitcoins( there are only 21 million bitcoins available in which 85% of them is already mined) is very huge so they nearly consume 120 TWh of electricity which is two and a half times the energy use per year of amazon, apple, Facebook, Microsoft and Google combined.
Bitcoin is an energy-intensive product but, some people deny it by saying that more than 39 percent of the energy required is met by renewable sources and miners always try to limit the cost of mining by moving to places where electricity is cheap and is in excess. Some miners have set up their base in cold places so that the energy required to cool the servers could be saved.
Some people believe that it could make electrical grids much greener for those companies which deal in renewable energy by giving them an easy alternative way to monetize their excess energy which otherwise could go to waste. There are many real-world scenarios where the output exceeds the demand. Consider for instance a wind power plant reaching its maximum capacity at night when the demand is low, or a solar farm on sunny days, or a hydroelectric power project during the rainy season in all these cases, the excess power goes waste and hampers the company’s profitability and in these instances, the company could sell the power directly to bitcoin miners making it a win-win situation for both the players.
Even though 61 percent of the energy used by miners is fossil fuels dependent which is a humongous account there is no ignoring the fact that with proper system and planning in place bitcoins could be the face of sustainable finance in the future.
