Would you work exclusively for Bitcoin

Cryptocurrency: How much does Bitcoin damage the climate?

The basic thought of its inventor Satoshi Nakamoto, whose identity has not yet been clarified, is to blame for the high energy consumption of the Bitcoin network. The problem with traditional currencies is that they require a lot of trust in the central bank and banks, wrote Nakamoto in an online forum when he presented his idea in the middle of the financial crisis. With Bitcoin, he wanted to create a digital currency whose users would not have to trust each other or any banks or middlemen. Just the technology.

This is possible thanks to the cryptography that gives the crypto currencies their name. All entries in the blockchain are public. But only those who know the appropriate cryptographic key can access the credit balance of an address. In addition, all computers in the network have to solve a cryptographic puzzle if they want to add a new block to the blockchain. The more computers participate, the more complicated the puzzle becomes. The first computer to solve the puzzle is rewarded with Bitcoin. The result is difficult to determine, but once found it is easy to verify.

This mechanism will proof of work called, proof of work, and it serves to protect the blockchain. No miner has enough knowledge or capabilities to manipulate the blockchain. "But that is exactly what ensures that the computers perform quintillion arithmetic operations every day that are ultimately useless," says Alex de Vries, "that is the sore point of Bitcoin."

However, there is an alternative to the proof of work, she calls herself proof of stake. The algorithm does not require proof of work in the form of a solved puzzle, but a proof of proportion. Computers with a certain amount of assets are given the right to update the blockchain. Diligence is replaced by power - and whoever cheats is threatened with the loss of power and wealth. "That almost completely reduces the energy requirement," says de Vries. "In addition, far fewer computers are required. This means that there is also less electronic waste."

There are now several cryptocurrencies that use this mechanism; the most sought-after are cardano and polkadot. Ethereum, the second largest cryptocurrency after Bitcoin, is in the process of being sold by proof of work to proof of stake switch. However, the mechanism has one weakness: it is more susceptible to manipulation and requires more trust in the reliability of those in power.