Now famous for providing the engine for a variety of ‘hidden’ digital currency systems such as Bitcoin, blockchain (or Distributed Ledger Technology) describes a computerized process intended to make databases more egalitarian, transparent, and virtually tamper-proof.
While this is an ideal outcome, arguments remain over whether the technology actually achieves its aims.
What’s more, the very way it accomplishes this makes it a questionable technology in a warming world bent on keeping a lid on the amount of energy being consumed.
Why is it called a blockchain?
The ‘block’ in a blockchain is a ledger of publicly available data. This could be just about anything, from the details of a monetary transaction to medical records to proof of ownership. It could be shared by a small group of friends, or open for anybody in the world to build on.
The development of blockchain in the 1990s came about as a way to ensure changes to documents were securely time stamped. It was only in 2009 that an engineer with the pseudonym Satoshi Nakamoto devised a database based on blockchain technology for a cryptocurrency called Bitcoin.
What sets the concept apart from most other databases and open documents is a unique identifier called a hash based on the document’s contents, providing a randomly generated code called a nonce.
Changing a block means creating a new hash, which equates to a whole new block. This new block references the hash of the previous block they were based on, which is what makes a series of blocks a blockchain.
Since each new block records the previous hash, the technology is, in principle, tamper-proof. If somebody were to edit a block earlier in the chain, perhaps to rewrite the history of ownership or change a value, its hash would also change. As a consequence, blocks extending down that chain would no longer link to it, rendering that chain invalid.
How does blockchain technology work and why is it so controversial?
In effect, there are two methods for ensuring each node in a blockchain is legitimate.
In permissioned blockchains, a consensus on the answer to these calculations based on the contents of each block is required. If most copies of a chain all agree on the calculation of the next block, it’s accepted.
Permissionless blockchains demand a convoluted process every time a new block is created. Described as an election mechanism, the calculations are based on an inbuilt puzzle that takes some time to solve.
In theory, this should slow down the creation of new blocks, but in practice, those with more computing power have the edge in solving these puzzles.
Why could some blockchain processes be bad news for the climate?
Regardless of what kind of blockchain technology you’re using, forcing a computer to calculate a proof of work for each new block takes energy.
Ordinarily, this might not be a big deal. But where popular forms of cryptocurrency are concerned, adding new blocks – or ‘mining’ – comes with a reward. Thanks to the economic rules built into the permissionless blockchain, each mined block earns the miner a small sum of coins.
This makes mining cryptocurrency a lucrative pastime, encouraging individuals to devote large amounts of computing power to the hefty calculations needed to solve the blockchain puzzle and build longer and longer chains.
Just a few years ago in 2018, the Bitcoin network oversaw around 26 quintillion (10 to the power of 18) hashing operations every second. While it’s clear each one requires electricity to run calculations and maintain the computers, getting a precise figure depends on the kinds of devices being used to mine.
One estimate put the amount of electricity being consumed by Bitcoin alone in 2018 at around 2.55 gigawatts, meaning Bitcoin’s energy usage is roughly in the same ballpark as a small nation.
Another estimate made by the Cambridge Center for Alternative Finance suggests Bitcoin is currently consuming more than half a percent of the globe’s electricity production.
Of course, the source of the electricity doesn’t necessarily have to be fossil fuels. In a future of clean energy sources questions of energy consumption might be less pressing. Changes to the way blockchains lock preserve their integrity, perhaps by weaving in quantum encryption, might even see ‘greener’ forms of crypto-economy.
None of that takes into account the huge amounts of e-waste generated by the industry though, which for Bitcoin alone could exceed 30 metric kilotons per year; comparable to the small IT equipment waste produced by a country like the Netherlands.
For now, nearly every new block in the chain comes with a side dish of carbon and tons of buried resources, making the rise in popularity of blockchain currencies a major environmental issue in the coming years.
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