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Does Bitcoin have to be a Planet Killer? - Crypto in Plain English - Episode 144 - by cryptohunt.it
Does Bitcoin have to be a Planet Killer?
Welcome to the cryptohunt jam where we spend one minute a day to explain crypto. In plain english.
We’ve covered and complained about Bitcoin’s energy consumption in this podcast a bunch, but let’s face it: Bitcoin makes up over 40% of the money, putting it far ahead in the first place. Clearly, Bitcoin is attractive to investors despite the carbon emissions problem.
So, the question is: Does Bitcoin HAVE to be a planet killer? Or can it be changed?
Unfortunately, it’s a little bit of both and the answer is: It’s complicated. So let’s break it down!
At the heart of Bitcoin’s wasteful nature is “proof of work”, a mechanism to validate transactions that burns energy by design. The thought is: Someone could take over the network by owning more than 50% of the mining capacity - which is called the 51% attack. So, let’s make it expensive for them to try, and introduce arbitrary energy intensive tasks each miner has to solve to participate.
This mechanism has been really effective at preventing a 51% attack. But Bitcoin doesn’t have to be this wasteful. The technology could be advanced to use more modern methods, like “proof of stake”. There, miners lock up funds in an escrow account in return for mining rights, and would lose them if they did bad things. Proof of stake blockchains are not only extremely fast, but also need just minimal amounts of energy.
But there is a catch, and it’s not technology, it’s human behavior. You see, mining is a HUGE business. Miners have invested millions into highly specialized Bitcoin computers, which are good at one thing, and one thing only: Solving those Bitcoin puzzles. Take the puzzles away, and the investment becomes useless.
The problem? You need more than half the actors on the network to agree to that change and they have deep financial incentives to dislike that change.
There you have it: It’s very unlikely that Bitcoin will ever become an energy friendly blockchain unfortunately. But as they say: stranger things have happened! Maybe we’ll all come to our senses one day and make the leap forward.
Disclaimer: This podcast references our opinion and is for information purposes only. It is not intended to be investment advice. Do your own research and seek a duly licensed professional for investment advice.
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By cryptohunt
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Does Bitcoin have to be a Planet Killer?
Welcome to the cryptohunt jam where we spend one minute a day to explain crypto. In plain english.
We’ve covered and complained about Bitcoin’s energy consumption in this podcast a bunch, but let’s face it: Bitcoin makes up over 40% of the money, putting it far ahead in the first place. Clearly, Bitcoin is attractive to investors despite the carbon emissions problem.
So, the question is: Does Bitcoin HAVE to be a planet killer? Or can it be changed?
Unfortunately, it’s a little bit of both and the answer is: It’s complicated. So let’s break it down!
At the heart of Bitcoin’s wasteful nature is “proof of work”, a mechanism to validate transactions that burns energy by design. The thought is: Someone could take over the network by owning more than 50% of the mining capacity - which is called the 51% attack. So, let’s make it expensive for them to try, and introduce arbitrary energy intensive tasks each miner has to solve to participate.
This mechanism has been really effective at preventing a 51% attack. But Bitcoin doesn’t have to be this wasteful. The technology could be advanced to use more modern methods, like “proof of stake”. There, miners lock up funds in an escrow account in return for mining rights, and would lose them if they did bad things. Proof of stake blockchains are not only extremely fast, but also need just minimal amounts of energy.
But there is a catch, and it’s not technology, it’s human behavior. You see, mining is a HUGE business. Miners have invested millions into highly specialized Bitcoin computers, which are good at one thing, and one thing only: Solving those Bitcoin puzzles. Take the puzzles away, and the investment becomes useless.
The problem? You need more than half the actors on the network to agree to that change and they have deep financial incentives to dislike that change.
There you have it: It’s very unlikely that Bitcoin will ever become an energy friendly blockchain unfortunately. But as they say: stranger things have happened! Maybe we’ll all come to our senses one day and make the leap forward.
Disclaimer: This podcast references our opinion and is for information purposes only. It is not intended to be investment advice. Do your own research and seek a duly licensed professional for investment advice.