Is Cryptocurrency Bad For The Environment?

So, we established that cryptocurrency is an online method to conduct financial transactions, but how exactly does it work?

A cryptocurrency like Bitcoin is comprised of a network of peers (miners) that have access to the entire history of all transactions and balances. Think of it as a big tree, called the decentralized system, that has branches or nodes extending to whoever wants access to it.

When you initiate a transaction, it gets broadcasted to every member of the tree. Your transaction will then have to be approved by others, making it secure and verified.

Once it is confirmed, it is added to the existing block of other data, making it permanent and unchangeable. This creates a chain of data blocks that carry the transaction records, intuitively called blockchain technology.

The whole concept of the currency is reliant on the network and miners that approve transactions and add it to the chain that cannot be altered, deleted, or hacked (although this has been proved to be untrue).

Who are the miners?

Bitcoin mining is the process of adding new bitcoins into circulation and is achieved by solving a special computational puzzle.

So, miners are people with crazy powerful laptops (or a series of laptops) that work as accountants for the blockchain network in exchange for new Bitcoins.

As popularity of Bitcoin and other cryptocurrencies grows and more people purchase, exchange, or use them, the more computing power is required to operate and verify them. That’s why, some miners have thousand computer operations across different continents to always stay on the top.

The main goal of a miner is to prevent double spending. Since all transactions are online and do not have a physical connection, there is no guarantee that the coin has not been spent before.

Miners verify blocks chains, where each block is worth 1 Mb (megabyte), and can contain information of either one transaction or thousands of them depending on their size and data.

If a certain miner happens to be the first one to mine a bitcoin, meaning solve a mathematical, computational problem, verify the transactions (combined together in a block) and add it to the main blockchain, then they are eligible to receive Bitcoin payouts. The hard part is that the amount of payout decreases with more miners and the probability to strike a “coin” is arbitrary and unreliable.

If you would like to learn more about Bitcoin mining, then Investopedia explains it very well.

What kind of math problems?

They are called hash — a mathematical function that converts an input of arbitrary length into an encrypted output of a fixed length. They’re always the same length, irregardless of the data inputted into the function.

A person cannot guess the function behind a hash or reverse-engineer it back to learn more. No two input hashes are going to provide the same output, so they are meant to be collision free and hidden.

A cryptographic hash function combines the message-passing capabilities of hash functions with security properties.

Hash functions are commonly used data structures in computing systems for tasks, such as checking the integrity of messages and authenticating information.

Investopedia

Solving the hash starts with the data available in the block header that contains a version number, the hash used in the previous block, the nonce, and the target hash among others.

The miner focuses on the nonce — a string of numbers.

This number is added to the hashed contents of the previous block, which is then hashed. If this new hash is less than or equal to the target, then it is accepted as the solution, the miner is given the reward, and the block is added to the blockchain.

Miners are compensated only if they are the first to create a hash that meets the requirements outlined in the target hash.

Source: https://rixliewrites.medium.com/what-is-cryptocurrency-and-its-affect-on-the-environment-dd99a30cecb1?source=rss——-8—————–cryptocurrency