Bitcoin, the first cryptocurrency, has a problem: It uses ghastly quantities of electricity and thus generates as much carbon emissions as a medium-si

Chia Is a New Way to Waste Resources for Cryptocurrency

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2021-05-23 14:00:04

Bitcoin, the first cryptocurrency, has a problem: It uses ghastly quantities of electricity and thus generates as much carbon emissions as a medium-sized country. This is by design. A new cryptocurrency, Chia, avoids this problem—in favor of creating huge amounts of a different kind of waste.

Bitcoin was meant to be decentralized so as to stay out of any central control. The “proof-of-work mining” process allocates fresh coins by a lottery. You enter this lottery by guessing numbers and running calculations on them as fast as possible—that is, you waste electricity to show your commitment. There is one winner every 10 minutes; as more people join the lottery, the guessing gets harder to stay at one winner every 10 minutes.

As long as people can make money wasting electricity, they’ll add more computing resources to win more bitcoins in an ever-escalating arms race. Bitcoin thus uses as much electricity as the Netherlands.

Proof of work has economies of scale: The bigger you are, the more efficiently you can create lottery tickets. Despite the grandiose claims of putting financial power in the public’s hands, bitcoin mining functionally centralized by 2014. The majority of bitcoin mining is three large pools. An electricity outage in one small area of Xinjiang in April 2021 took a quarter of all bitcoin mining offline. Bitcoin mining also uses specialized computers that just calculate cryptographic hashes as fast as possible; once the mining computers are obsolete, they’re just e-waste.

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