Anyone who’s researched cryptocurrencies has inevitably encountered the term “mining”. Simplified, this term refers to the process of creating new coins. The process revolves around miner’s ability to solve several algorithms in quick succession and record transactions on the blockchain. In return, miners get rewarded with a predetermined amount of the currency that corresponds to that particular blockchain. This process is what generates new cryptocurrency and keeps everything working, since this maintains the blockchain and, in return, the blockchain maintains the currency. Typically miners partake in this process to make a profit, but electricity costs quickly eat into them. As a result, mining and solar are quickly becoming interrelated.
Understanding the system
Mining, verifying transactions, and organizing them into a blockchain is all part of an overarching concept called Proof of Work (PoW). PoW prevents denial of service attacks and other malicious attacks and signifies that miners have indeed worked to solve complex algorithms necessary to secure the system. As blocks are added to the blockchain through this process, miners are periodically rewarded with new tokens for their services rendered. As a result, attacking the blockchain would require an investment much higher than any profits that would stand to be made. Moreover, violating the ledger requires a time longer than the heat death of the universe.
Why does this make mining so expensive?
Finding a block requires the solution of a significant amount of equations or functions called “hash”. A hash is a function used in cryptography and programming to identify keys, codes, and the like. Every potential miner has to acquire the equipment that will solve the largest amount of hash possible. To accomplish the objective several dedicated mining computers are needed. These computers’ efficiency is measured by their hash rate which is how many hashes it can solve per second. Since the hashes keep increasing in quantity, equipment becomes obsolete very quickly.
The electrical problem
It is the demand for power by dedicated miners that makes electricity cost the biggest mining setback. While the introduction of Proof of Stake (which eliminates the competition to be the first block-finder by setting up a deterministic election system) is looking to remove this energy deficiency, a lot of users have found a cheaper, and greener, alternative.
The birth of solar
Solar-powered mining farms date back to 2012. One of the first cases involved a Reddit user who set up his operation in the desert. This strategy allowed for maximum sun exposure to generate the massive amounts of electricity to power his equipment. The initial investment was high, but ultimately lucrative, he revealed. In order to remain profitable, Bitcoin must hold the $2,000 USD threshhold. With Bitcoin soaring past $4,000 and easily holding that level despite turbulent market developments, he has chosen to increase his Antminer S9 ASIC count from the cautious initial number of 25 to 1,000. Each unit represents profit potential of $18 per day, so this will scale his daily profit through the roof.
Another example is a company by the name of Avalon Life dedicated exclusively to cryptocurrency mining. Avalon opened its first major mining operation in Costa Rica. It operates efficiently off combined solar and geothermal power to provide uninterrupted, clean energy throughout most of the day. The grid is only used to supplement at night and during odd times throughout the year.
The solar revolution
Solar energy is not only cheaper long term, but also eco-friendly. This is important whenever we speak about crypto mining since the power it drains is massive. The Bitcoin Foundation estimates that it will reach the same amount of electricity used in Denmark by 2020. Solar energy is expected to lower the power drain generated by Proof of Work significantly.
To encourage this, SolarChange (a platform supporting the spread of solar power usage) launched the SolarCoin, a crypto coin that is only mined through the production of solar energy. Once any user has generated 1MWh from solar energy converted into electricity, the user will be rewarded with 1 SolarCoin, which can then be exchanged for any fiat currency or cryptocurrency.
To increase the cryptocurrency’s liquidity, Lumo and TheSunExchange, two solar crowd-funding platforms, are incorporating SolarCoin as well as French energy supplier eWateur, becoming the first energy company to accept SolarCoin as a means of payment. Between cleaner electricity production methods and revolutionary technology supplementing the blockchain, we can expect to see continued adoption and improvements to these systems moving forward.
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