The pioneering cryptocurrency Bitcoin BTC/USD, which still dominates the market today, has encountered several difficulties along the road, with the most pertaining to its proof-of-work (PoW) mining consensus and the subsequent environmental effect.
One of the most talked-about issues last year was the high energy usage of the Bitcoin network, with the likes of Tesla Inc TSLA CEO Elon Musk stoking the idea that Bitcoin in its current form is harmful to the environment.
Mining firms however have been researching the usage of renewable energy for some time, and the most recent reports indicate that 58% of the energy used by the Bitcoin network originates from renewable sources.
In 2022, the discussion appears to have changed from the use of sustainable energy to a total overhaul of the mining consensus, with a powerful lobby and proof-of-stake (PoS) proponents asking for a change in the Bitcoin code.
The switchover of Ethereum ETH/USD from proof-of-work to proof-of-stake, which took place last month, also fuels demands for the change.
With PoW being the original crypto mining consensus, it was adopted by a number of pioneering crypto projects and made popular by Bitcoin, while PoS was introduced with the release of Peercoin in 2013, and while it was not favored, its capacity to scale and low energy consumption made it a popular option for new cryptocurrency ventures.
The hype surrounding Ethereum's shift to PoS has reignited the conversation around Bitcoin's hard fork toward PoS consensus.
In this article, we list a few reasons why it is highly unlikely for Bitcoin to move to PoS.
The immutability of Bitcoin
Immutability refers to the fact that current data on a blockchain cannot be changed or tampered with, and that these data records are irreversible.
Bitcoin does this by using distributed ledger technology, along with timestamping on its blockchain, to concurrently maintain identical data on multiple computers all over the world.
By hashing the transactions into a continuous chain of hash-based proof-of-work, the network timestamps transactions, creating a record that cannot be modified without repeating the proof-of-work.
Even if "redoing the proof-of-work" required continuing mining (maintaining a PoW system), there would still be difficulties because of the more than 13 years' worth of data on a blockchain that operates around the clock.
It would very difficult to transfer this enormous load of data from the existing chain to a new one that uses PoS.
In contrast, Ethereum’s merge was only completed last month after years of discussion between Ethereum developers and other stakeholders.
While Bitcoin started in 2009, Ethereum was launched in 2015.
Deploying a substantial modification to an entire system that was once intended to be immutable will be far more difficult.
Although switching from PoW to PoS is technically possible, it would be very challenging and unfeasible, not to mention, extremely unpleasant for the mining community.
The cost of Bitcoin mining equipment would dramatically decrease
Miners must use application-specific integrated circuit (ASIC) miners, highly specialized equipment, to do complicated computations and to accommodate the extremely high hash rates required for mining the cryptocurrency, in order to mint Bitcoin.
There are few options for Bitcoin miners to mine other digital assets.
It is not just a matter of moving from one PoW asset to another, since ASIC miners are made to concentrate on a single kind of hashing algorithm, using SHA-256 in the context of Bitcoin.
Although its blockchain has its own advantages and disadvantages, Bitcoin Cash BCH/USD is the only realistic alternative.
It is doubtful whether a massive inflow of Bitcoin miners could be profitable or practicable on other blockchains that employ SHA-256 currencies, particularly for numerous lesser-known coins.
Obtaining majority approval for this action
At least half of the network's stakeholders must agree to support a radical change to its ecosystem for this plan to have any chance of success.
It would be very difficult to convince miners to support the move, especially those who had spent hundreds of thousands or even millions of dollars on mining farms.
Making and running mining equipment using greener energy sources
In addition to the enormous energy needs of Bitcoin mining and transactions in general, as well as the associated electronic waste, the Bitcoin network provides strong security due to its overall hash rate.
This in turn affects how well it can defend against a 51% attack.
Also read: ESG Labels For Crypto? Europe Looks To Offset Energy Consumption In Environmental Push
The massive use of renewable energy, or possibly nuclear power, is a vital strategy to assist in decarbonizing Bitcoin.
In addition, innovative methods must be developed to use more of the waste heat produced by machinery.
As a result, especially in colder regions, miners are implementing creative techniques to effectively harness this energy.
To make Bitcoin a truly eco-friendly digital currency, though, more must be done to better utilize these resources.
It is also crucial to efficiently manage and reduce related e-waste.
In order to preserve stability, Bitcoin's hash rate must rise as the network is anticipated to expand.
If this does not result in significant power savings being built into future machines, mining equipment's overall energy intensity will grow.
Finding solutions for these environmental problems would also be more rational and realistic than totally changing Bitcoin's consensus method.
Not only would it likely result in fewer network outages, but it would also be less expensive and polarizing for the community.
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
Comments
Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.
