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The Coal Miner's Bother: Why Proof-of-Work is Problematic

By Todd Mei PhD | Crypto U Education | 13 Jan 2023


Laptop with crypto coin and Scrabble tiles reading Bitcoin Mining Photo by Olya Kobruseva on Pexels

The press is bad. Mining for cryptocurrencies that use Proof-of-work consumes a great deal of energy. In a state of climate change emergency, this makes cryptocurrency out as a villain. In 2021, it was estimated by the Cambridge Bitcoin Electricity Consumption Index that Bitcoin Proof-of-work mining used as much as 480 terrawatt-hours. The State of California uses 259.5 terrawatt-hours annually (or 7% of the U.S. total).

To top it off, that energy is used to solve puzzles. Imagine playing an intensive round of Wordle using the equivalent amount of energy to run your refrigerator!?!

But, even as a villain, cryptocurrency may be redeemable.

To figure if this is the case, let’s take a deeper dive into the realm of the Proof-of-work miner.

What In Tarnation is a Blockchain Miner?

With obvious allusions to digging for gold, blockchain mining describes the process by which one can receive rewards in cryptocurrency for their labor. In the case of blockchain technology, the actual labor of mining is using sophisticated computers and a great deal of energy to solve complex mathematical problems, or hash puzzles. Why solve these problems?

Unlike the act of mining gold, being a blockchain miner serves utility for the wider community (whereas mining for gold does not; it serves only one’s motive for profit). The utility in this case is verification of transactions occurring on the blockchain.

Hence blockchain mining is the process by which miners validate transactions on the blockchain by solving mathematical problems and are rewarded for doing so. Correlatively, the labor that miners do in validating transactions is referred to as “Proof-of-work”. (Transactions are “proved” by the work process of mining.)

Bitcoin miners are probably the most well-known. China banned Bitcoin mining in May 2021 over environmental concerns. Prior to that, it was estimated that the number of miners worldwide was around 1 million.

There is much more to the process of mining in terms of why it is necessary, how the competition works, and how bad or malicious mining behavior is disincentivized.

Why Mining Is Compute Power Intensive

(This portion was contributed by Sebastian Purcell, PhD)

Remember that “mining” is a race to find the right number first in the puzzle game in order to validate a block. Miners are incentivized to use as much computing power as possible, then, to mine as fast as possible. But not all computational work is the same.

Early on in the Bitcoin mining process, computer engineers realized that graphics processing units (GPUs) would be better at solving for the SHA-256 hash that Bitcoin uses than the central processing unit (the CPU). After that, they realized that they could mine even faster if they were to turn the process into specialized hardware chips.

The idea is that software is slower than hardware. If you can build a chip that runs just one program, it would be the fastest possible solution for that program. Those chips are called Application Specific Integrated Circuits, or ASICs.

Faster iterations of those ASICs emerge every 12 months or so, and Bitcoin miners need to continue to upgrade with these new hardware builds to stay competitive.

Other blockchains, such as the one that Ethereum used before the Merge, have a different algorithm. Those were not easily put into ASICs and ran best on GPUs. That’s why they have Proof-of-work blockchains optimized best, using the same graphics cards you could buy for top-end video gaming experiences.

Is All Lost?

Yes and no. There is obviously a vested interest in maintaining a status quo: You adopt a technique for doing something and making a living, so you will resist changes to that technique. Take the case of an Ethereum fork as a classic instance. While Ethereum takes the step to transition from Proof-of-work to Proof-of-stake (which consumes much less energy), the Proof-of-work miners want to create “fork” in order to keep doing what they’re doing.

Whether or not the fork succeeds, the key figures in the crypto community are looking at ways to make the virtues of blockchain technology more environmentally friendly. So while the drawbacks of a decentralized system of finance and utility are resource-consumption heavy, there are remedies.

The next phase of cryptocurrency will incorporate more environmentally-friendly techniques, especially as it faces governmental pressure to do so (of course).

How to Apply This

Keep an eye on how protocols verify transactions. It’s the equivalent of buying from responsible retailers and manufacturers. And where Proof-of-work is being used, check to see if they are using that energy consumption to resolve more than hash puzzles. That work can be used to help execute tasks in real use cases.

There are quite a few projects trying to leverage the energy used in Proof-of-work to contribute to the moral and practical greater good of society. And that’s what real finance is for, isn’t it???


This article originally appeared on Medium and is a part of the Crypto Industry Essentials educational program presented by The Art of the Bubble.

Though this article is credited to me, it contains some written material by Sebastian Purcell, PhD from his The Art of the Bubble education series on cryptocurrencies.

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Todd Mei PhD
Todd Mei PhD

Todd is a former Associate Professor of Philosophy with over 16 years of research experience in the philosophy of work and economics. He is currently the lead researcher and writer for the Web3 consultancy group, 1.2 Labs.


Crypto U Education
Crypto U Education

Cypto U is a series of blogs providing educational content for crypto enthusiasts. Content and lessons have been taken from The Art of the Bubble and 1.2 Labs.

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