Cryptocurrency is any digital currency that is decentralised, meaning it’s not under any authority such as a bank or government. Crypto is based on blockchain technology, making fraud and counterfeiting near impossible.
Digital currencies allow quick transactions from practically anywhere in the world and provide a high level of security, not seen with standard forms of currencies. They are also popular among traders and in recent years have rivalled the traditional types of currency trade such as CFDs, stocks and spread betting.
However, cryptocurrency can be subject to extremely volatile market conditions and can be a rather big risk for many traders. Digital currency is heavily influenced by the media, particularly social media, and investor trends. Geopolitical events and issues also cause large fluctuations in the crypto market.
Bitcoin
This is perhaps the most well-known digital currency, but what people might not be as aware of, is the energy use behind it. Many struggle to fully comprehend the complexities behind Bitcoin and even fewer understand the energy consumption needed to mine it. However, research shows that Bitcoin actually uses more electricity a year than Norway. As staggering as that might sound, it’s largely down to the decentralised network.
The network Bitcoin uses to process and validate transactions has to figure out very complex mathematics. As the industry grows, more and more computer systems are having to get involved with trying to be the first to solve them, therefore the electricity usage is increasing at vast rates.
What can be done?
With some saying that crypto alone is fueling the climate crisis, there have been suggestions as to what can be done about the digital currency energy consumption issue.
Renewable energy
Changing to a fully renewable source could combat part of the crypto energy problem. Such sources include solar, wind energy and biomass.
Create a set amount
Also called pre-mining, this means releasing set amounts into the economy, much like governments and banks do with traditional currencies. This would get rid of the huge amounts of waste but would likely take a lot of time, effort and persuasion.
Offset energy emissions
This could involve funding or investing in sustainable projects, equivalent to a digital currency’s energy consumption. Whilst this wouldn’t necessarily eliminate the problem of huge energy usage, it’s one step that could be taken to balance out emissions.
With worldwide rising energy costs, companies like Bitcoin might find that using more efficient means to mine their currency could mean greater profits in the long-term. And if users of crypto continue to grow, this can only be a good thing for both parties.
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