Sustainable Cryptocurrency

Cryptocurrencies are an emerging class of digital asset which may or may not be used as media of exchange in the future. Though cryptocurrencies have many features endowing some people a fascinating future that they may be able to replace current sovereign currencies or become the major form of sovereign currencies, the most critical challenge for implementing this vision is energy consumption.

Current cryptocurrencies are known to be very intensively energy-consumed. Bitcoins, as the pioneer and a major player of cryptocurrencies, consumes electricity more than most countries in the world. The Cambridge Bitcoin Electricity Consumption Index estimates that Bitcoin’s annual power consumption is more than 143 TWh, which accounts for 0.66% of total electricity consumption.

The online tool has ranked Bitcoin’s electricity consumption at the 27th place, above Sweden (131.80 TWh), Ukraine (128.81 TWh) and approaching Malaysia (147.21 TWh). It grown in a significant rate (~122TWh -> 143TWh, ~0.6% -> 6.6%, 30th -> 27th), compared to the reported Bitcoin’s electricity consumption in the earlier of this year, and it is still growing soon.

The intensive electricity consumption of Bitcoin caused by both of the mechanisms for issuing currency (mining) and supporting transaction (distributed ledger). Considering that Bitcoin is currently used for very limited transactions, current cryptocurrency designs may not be really practical as a medium of exchange for everyday uses, in terms of energy consumption.

Cryptocurrencies are conceptually interesting and may have the potential to reshape our financial systems. So we may need a XPRIZE challenge to formulate effective solutions for making cryptocurrencies sustainable and applicable for real applications. The subdomain may fall into the class of “Energy” and/or “Climate”.

Excellent point. Cryptocurrencies consume more energy than entire nations:

Cambridge Bitcoin Electricity Consumption Index:
https://cbeci.org/

Excellent idea.

Funny thing is, the prize for the winning teams could actually be given in bitcoin, or in whatever other cryptocurrency they invent in the course of the competition :wink:

Hi @akb, @Magneto, @adventureashr and @agval - What are your thoughts on this topic. If you agree with Crointel, please vote for this topic or else add a new topic which you feel is important for XPRIZE to focus on under energy domain. Thanks.

That’s funny. Indeed, they might be awarded with their own creation… :grinning:

I agree - the growing energy consumption of such systems is not a great concept, in a world of climate change. I support this proposal (to find better alternatives).

Note that alternatives do exist. For example, a nice sounding one is where “coins” are created for each unit of renewable energy generated. Its technical merits are unknown to me, at the present time.

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The idea of renewable energy unit-based coins is interesting. Ideally currency issuance should reflect the total wealth we created or are creating to keep the currency’s value or exchange rate to other currencies stable, if it really wants to be used as a medium of exchange. Anchoring them to renewable energy units might be great.

That’s a good idea. Thanks @akb for sharing your thoughts.

@akb -
I believe you’re thinking of the KWHCoin -
https://www.kwhcoin.com/#/the-cryptocurrency-blockchain

The idea, however, seems strange to me at first glance. The security of a cryptocurrency is directly tied to the scarcity of resources dedicated to maintaining the security of the platform. For Bitcoin that means that since so many users invest so much time and effort mining, the system is very difficult to hack (unless you can set enough processors to equal those of half the miners in the world).

In the case of KWHCoin, it seems like any country that is investing heavily in renewable energy, would gain power over the platform. While you might say that this condition will lead more countries to invest in renewables, the truth is that nobody will be able to rival the superpowers - China, U.S. and maybe India sometime in the future. As a result, nobody will bother with this coin in the first place, since it is not safe: 2-3 governments can play with that market as they wish.

Did I miss anything?

In a KWHCoin-like system, maybe it’s not necessarily an automatic inclusion of all renewable energy units. Can those from superpowers be excluded in some way?

The potential for unequal distribution of coin generation is a factor to consider. However, if every house had solar panels and turbines that might level things up, perhaps.

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Hi @b0bbybaldi, @darlenedamm, @Shepard, @anis, @Magneto - Curious to know if you have any thoughts to share on this topic. Do you think it is worth the next $10M XPRIZE? if yes; vote for this topic. Thanks.

@Shashi although doable I don’t think it’s worth it yet, there are far greater issues with cryptocurrencies than energy generation for them.

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Thanks @Shashi. My initial sense is that while it is true that it is a problem right now, it might make more sense to try to use the prize to create renewable energy more broadly.

Thanks @b0bbybaldi and @darlenedamm for sharing your thoughts on this topic.

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Would you mind expanding on those issues? Maybe we can focus on them in a future competition.

@Roey sure, besides the issues of scaling up and the impact that it might have on energy generation there are other risks that need to be addressed before cryptos can really take off beyond the hype:

  1. Cybersecurity is a no brainer for this, perhaps involving quantum computing passwords would be interesting for it…

  2. Regulation to enable wide acceptance and thus gain trust is also key, this one though is a tough one as it has to be done by the government.

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  1. Finally the hardest obstacle is the lack of inherent value which is evidenced in the increasing diversity of currencies mined, as well as the extreme volatility of the perceived value of such assets in the market.

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About 1: Agree. Security problems for cryptocurrencies in the future could be very interesting.
About 2: It’s an interesting issue. Cryptocurrencies were created to be beyond regulation, but might be popularized by regulation.
About 3: It is true for now. So as @akb suggested, some efforts are trying to anchor a cryptocurrency to units creating values.

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@crointel the disruption of money is no easy feat, and this is often overlooked. Central banks have been around for centuries and the popularisation of a currency that does not depend on them invalidate their power and thus much of the power of the state. This would be leading to an entirely different geopolitical system than the one we know. Digital ledgers have great potential for many things, specially ones involving unique identities, but I think it would be naive to think it would be disrupting money any time soon. I recommend reading this piece written by Ray Dalio, one of the greatest financial minds of our time: https://www.bridgewater.com/research-and-insights/our-thoughts-on-bitcoin

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