Why cryptocurrency is unsustainable, and how to solve it

Introduction – Cryptocurrency is unsustainable

You’ve probably seen cryptocurrency in the news, often in a more negative light than positive. One big part of the media attention comes from the meteoric rise and fall of prices for cryptocurrencies. Let’s take for instance Bitcoin as an example, going from $3,500 all the way to $70,000 before falling back to around $17,000. All in the span of a year or two. The fact that Bitcoin has these wild swings in price and is not ideal for transactions, makes it less of a currency, and makes it appear more as a speculative asset that people trade on. That does create some attention in the media, and causes critics to look deeper into the technology behind it and the long term sustainability. And that’s where we start to see some cracks forming. Especially when it comes to energy consumption – the other negative media attention Bitcoin and cryptocurrency receives. So let’s dive deeper into this energy consumption issue of cryptocurrency like Bitcoin.

What is cryptocurrency and why is it unsustainable? 

To understand why Bitcoin and similar cryptocurrencies use so much energy, we also need to understand the idea behind it. There are a few issues with government-issued currencies like the euro, dollar, british pound etc. The first problem is that a government can decide how much of the currency is circulating. You’re probably noticing at the moment that governments are printing more money, causing inflation and therefore prices of goods and services  to go up. This devalues the money you hold in the bank. A good example would be someone in 1920 having $7000 in his bank account – enough to buy a house in New York at the time. Fast forward to today, and that $7000 is maybe just enough to rent an apartment for a few months!
This is still a mild example. In other countries like Venezuela, Nigeria and even Germany in the last century, money printing has gone out of hand, causing hyperinflation and consequently the entire economy to collapse. Time and time again, governments all over the world have proven that money printing is an issue, and they can not be trusted with this responsibility.

Besides this, governments and banks have the power to disconnect any person from the global economy. People that are already registered at a bank can have their bank accounts frozen or their funds taken from them. But besides that, many people are excluded from using banking infrastructure in the first place because they do not have the required documentation to register at  a bank and open an account.

This registration process requires having a registered home address – something 1.2 billion people in the world do not have. This means 1.2 billion people are not able to participate in the global economy. A decentralised peer to peer currency, however, would mean no banks are needed. An open, decentralised network where anyone can participate. Because no one government has control, a decentralised network like Bitcoin does not belong to any specific country and would take away the ability for any government or central bank to print more money. This makes it a global currency. One that can be used anywhere in the world, without the need to register at a bank and without more of the currency being printed by a government.

But how do you make such a currency? There must be someone, or a group of people, that decides which transactions are valid and which aren’t, and that makes sure everyone keeps following the rules of the network. To make sure no one cheats the system.

Mining

In Bitcoin, this is where mining comes in. Mining is an energy intensive process in which every 10 minutes a leader (computer or group of computers) is chosen that gets to decide which transactions to process. This leader is chosen by chance, but the chances of being chosen can be increased by having more computing power. The one that is chosen as a leader gets a reward, in the Bitcoin network that reward is a certain amount of Bitcoin.

This is where we start seeing some problems. People are incentivised to have as much computing power as possible, in order to receive more rewards. Having that much computing power, consisting of a lot of hardware continuously running at maximum capacity, consumes a lot of energy. Because large companies are doing this, and growing as they keep doing it, the energy consumption of Bitcoin continues to grow. Right now, the network is already using more energy than the entire country of Argentina! Even though some argue that a lot of the energy used for the network is green energy, it is still estimated that one Bitcoin transaction equals the carbon emissions of two transatlantic flights – from London to New York and back! Note that this happens around 7 times every second. Bitcoin is responsible for the carbon emissions equivalent to 14 transatlantic flights… every second.

Additionally, all the computers that are being used in this process only last a short amount of time, leading to a lot of hardware being thrown out. The hardware waste of the Bitcoin network is comparable to the waste of the entire IT sector in the Netherlands.

Can we replace this energy intensive method with a more efficient one?

We need a solution that is far more efficient.That doesn’t incentivize anyone to grow their stake in the network or their computing power. A solution without mining. And this is where nano comes in.

Nano is the most efficient decentralised currency in the world. Developed by a not-for-profit organisation called the Nano Foundation, the goal is to empower anyone to participate in the global economy using a sustainable network and currency. This is why nano doesn’t use mining and doesn’t have any direct rewards for those processing transactions. Instead, it uses a system that resembles democratic voting. Everyone in the network is incentivised to work together and help decentralise the network, no one gets rewarded for centralisation. Additionally, the network is far more energy efficient than those like Bitcoin that use mining – the energy used for one Bitcoin transaction can power more than 15,000,000 nano transactions!

There is no competition to have more computing power than others, so no reason to buy a lot of expensive and energy consuming hardware.

Because the network is so efficient and there are no direct monetary rewards for those processing transactions, the network is also free to use, transactions have no fees at all. This makes it perfect to use as a currency. Not as a speculative, energy consuming asset.

It makes it usable by anyone that has a phone and internet connection. This is what a new, global currency should be. Decentralised, accessible for all and sustainable even in the long term. This is exactly what nano is trying to achieve.

Want to learn more about nano, how to start using it and where to spend it? Check out nano.org

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