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Dissecting Bitcoin’s Electricity Consumption

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With a market cap of over $170 billion, Bitcoin is the largest cryptocurrency by market cap. With a price of over $9,000 for one Bitcoin, the cryptocurrency has come a long way since its inception over a decade ago. With Bitcoin peaking at $20,000 in December of 2017, Bitcoin miners continue to flock to the network in the hopes of making a profit themselves. Despite the Bitcoin correction in 2018 and the recent halving event, the Bitcoin hash rate continues to skyrocket.

Source: Blockchain.com

According to the Cambridge Bitcoin Consumption Index, the Bitcoin network is estimated to consume 59.19 TWh per year. In other words, more electricity than the entire country of Switzerland. However, it is important to note these figures are only estimates.

Source: Cambridge Bitcoin Consumption Index

The Bitcoin network’s electricity consumption is also equivalent to about 0.27% of the entire world’s total electricity consumption, according to the Cambridge Bitcoin Consumption Index. Furthermore, with the world’s current dependence on fossil fuels, Bitcoin’s massive electricity consumption may have adverse long-term effects.

Why does the Bitcoin network consume this much electricity?

To understand why the Bitcoin network consumes so much energy, it is important to understand how Bitcoin mining works and why miners mine Bitcoin.

Proof-of-Work (POW)

Bitcoin utilizes a proof-of-work (POW) consensus mechanism to validate and process transactions on the Bitcoin blockchain. Bitcoin is not the sole cryptocurrency using POW, as both Ethereum and Litecoin currently employ a POW consensus mechanism. In a proof-of-work network, cryptocurrency miners utilize computing hardware and compete with one another to solve mathematical puzzles. The miner who finds the solution to the puzzle has effectively mined the next block and is rewarded with the block reward. While the block reward’s value differs from one cryptocurrency to another, the current Bitcoin block reward if 6.25 Bitcoin, down from the 12.5 Bitcoin before the halving event. Bitcoin halvings occur roughly every four years and slash the block reward in half to curb the cryptocurrency’s emission. Despite this, each block is still currently worth well over $50,000 as miners also earn transaction fees on top of the already lucrative block reward.

To mine Bitcoin, miners have to purchase ASIC (application-specific integrated circuit) miners, tailored to mine on the SHA-256 algorithm. Like typical computer hardware, ASIC miners consume electricity to operate and mine Bitcoin. As a result, the combined ASICs around the world mining Bitcoin consume vast amounts of power.

Why does the Bitcoin network have so many miners

With Bitcoin’s electricity consumption driven by Bitcoin miners, the question of why there are so many miners on the network arises. With each Bitcoin block worth over $50,000, the total reward pool for mining a Bitcoin block is fairly large, and therefore there will be more miners looking to get a slice of the lucrative Bitcoin pie.

With Bitcoin’s network already so large, without a massive Bitcoin mining farm, it is highly unlikely to find a block solo mining. As a result, many Bitcoin miners join mining pools to combine their hash rate to have a higher chance of finding a block. Once the pool finds a block, the Bitcoin rewards are distributed among the pool’s miners. As a result, pool mining ensures that Bitcoin mining is not limited to just large farms, thus increasing mining accessibility.

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To Summarize

While Bitcoin’s massive electricity consumption has its obvious downsides, the large size of the Bitcoin network promotes decentralization and bolsters network security. Furthermore, while Bitcoin consumes an enormous amount of electricity, another solution to minimize the long-term impact on the environment is increasing miner dependence on renewable energy. According to the Cambridge Bitcoin Consumption Index, current renewable energy can provide enough power for the Bitcoin network many times over. Therefore, Bitcoin mining can be conducted with minimal environmental impact if powered through renewable means such as solar energy.


Adit Gupta is the founder and editor-in-chief at The Crypto Associate, a crypto media publication.

 

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Disclaimer: Opinions expressed at The Daily Hodl are not investment advice. Investors should do their due diligence before making any high-risk investments in Bitcoin, cryptocurrency or digital assets. Please be advised that your transfers and trades are at your own risk, and any loses you may incur are your responsibility. The Daily Hodl does not recommend the buying or selling of any cryptocurrencies or digital assets, nor is The Daily Hodl an investment advisor. Please note that The Daily Hodl participates in affiliate marketing.

Featured Image: Shutterstock/Lisa-S

Source: https://dailyhodl.com/2020/07/13/dissecting-bitcoins-electricity-consumption/

Blockchain

Binance Might Delist Many Low-Volume Coins Soon, CZ Hints

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Binance is the world’s largest cryptocurrency exchange by means of daily trading volumes. In the few short years since its launch, the venue went on to become a leading company in the industry.

In fact, launching coins up for trade on the exchange has created the so-called “Binance Effect.” In short, when a cryptocurrency is selected and launched for trading on the platform, its price usually undergoes a substantial surge.

Now, the CEO of Binance, Changpeng Zhao, has hinted that it may start delisting low-volume coins.

Low-Volume Coins May Kiss Binance Goodbye

In an interesting Twitter thread, a popular cryptocurrency analyst and trader RookieXBT suggested delisting all coins on Binance that “do less than 10 BTC of daily volume.”

Expectedly or not, the CEO of the exchange engaged in the thread, providing a hint that they might consider doing so.

“I think it is a good idea. If you are on Binance and still have no volume, then…” – Said CZ, perhaps hinting that there’s something inherently wrong with coins listed on Binance and failing to generate big daily volume.

Naturally, there are two sides to this debate. Some users think that the merits of a coin shouldn’t be valued based on the volumes it generates on cryptocurrency exchanges. People argue that they hold a coin for the long-term and don’t really care about the daily volume.

This is most definitely true. The inherent merits of a cryptocurrency are most definitely not associated with it being listed on a certain exchange, be it Binance. So, a logical question pops – why would someone care if the coin is listed or not, presuming they are “in it for the technology”? And this is where things take a twist.

The Other Side of the Story

At this point, it becomes rather clear that this particular narrative doesn’t stand on solid ground because people are obviously concerned about the price, perhaps even more so than the technology itself.

If an investor is holding a cryptocurrency for the long run, it being listed on Binance shouldn’t make a difference. But that’s usually not the case – people are rarely “in it for the technology” despite what they might claim.

The main concern is that if Binance decides to delist low-volume cryptocurrencies en-masse, this might cause a larger upset in the market because of the “Binance Effect.”

As we mentioned before, when a cryptocurrency is listed on Binance, it usually goes through a substantial increase. However, the opposite is also true. Last year, the exchange delisted Bitcoin SV, and it tanked more than 10% on the news. That’s just one example.

In any case, there’s no formal confirmation, and it remains interesting to see whether the exchange will really start delisting coins based on low volumes.

Featured image courtesy of Medium

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Source: https://cryptopotato.com/binance-might-delist-many-low-volume-coins-soon-cz-hints/

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Blockchain

Fidelity’s Crypto Subsidiary Targets Asian Investors To Buy Bitcoin

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  • Fidelity Digital Asset Services (FDAS) has partnered with Stack Funds to enable Asian investors to purchase and store cryptocurrency assets more freely and securely. 
  • Based in Singapore, Stack Funds is a regulated fund manager focusing on Bitcoin and other digital assets.
  • According to the Bloomberg report, Stack Funds will make Fidelity’s secure custody services available to its clients, primarily based in Asia. The company outlined that the Asian market has been continuously growing in demand towards the cryptocurrency industry, especially from high-net-worth investors and family offices.
  • Stack further explained that all assets under its management will be audited monthly. The firm will provide insurance coverage, weekly contributions, and redemptions to enhance capital security.  
  • Stack’s co-founder, Michael Collett, said that Fidelity’s involvement will enable its company to attract even more investors from the region. 
  • On the other hand, Christopher Tyrer, head of Fidelity Digital Assets Europe, believes that “there’s a critical need for platforms which have a deep understanding of what local and regional investors are looking for.” However, he admitted that the digital asset space has “historically lacked” such platforms. 
  • After its success in the US, Fidelity Digital Assets expanded its cryptocurrency services to Europe last year. The company aims at entering the Asian market as well now with the Stack Funds partnership. 
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Source: https://cryptopotato.com/fidelitys-crypto-subsidiary-targets-asian-investors-to-buy-bitcoin/

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Blockchain

Hacked? Crypto Lending Platform Cred Suspends Deposits And Withdrawals While Cooperating With Authorities

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The popular cryptocurrency lending service Cred has announced that it has temporarily suspended all funds inflows and outflows. Without disclosing many details, the platform said it’s cooperating with law enforcement authorities to investigate an incident.

Cred Suspends Deposits And Withdrawals

The United States-based crypto lending platform, which recently announced joining Visa’s fast track program, updated its customers on Twitter regarding the latest troubling developments with a brief message.

“Unfortunately, we are unable to comment further at this time, but we will undertake to provide an update within the next two weeks. During this period, all inflows and outflows of funds will be suspended.” – read the statement.

Staying true to its fashion, the cryptocurrency community lashed out at Cred and its lack of details about what’s going on. This reaction prompted the lending protocol to comment once again. Firstly, Cred apologized for the concerns and inconveniences it has caused while it’s assessing the “business impact connected with a recent fraudulent incident.”

Furthermore, the post explained that Cred is currently cooperating with law enforcement authorities. However, it provided some reassurances claiming that “no client personal data or account information was compromised.”

It’s worth noting that Cred’s website reads that the platform works with “trusted security and insurance providers Fireblocks and Lockton to ensure that our customers’ digital assets have enterprise-grade security.” Nevertheless, several community members have questioned the state of their holdings on the platform, as they weren’t satisfied with Cred’s brief updates.

A Dissolved Partnership Saw This Coming?

Although it’s still unconfirmed if the so-called “incident” is indeed a hack, it seems that the issues have been transpiring for a while now. Days before Cred suspended deposits and withdrawals, one of its partners ended its relationship with the lending protocol.

The cryptocurrency wallet and trading platform, Uphold, announced on Sunday that users could no longer link their Uphold wallets to the third-party crypto lending provider Cred.

At the time of this writing, neither Uphold nor Cred have disclosed why their partnership agreement ended.

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Source: https://cryptopotato.com/hacked-crypto-lending-platform-cred-suspends-deposits-and-withdrawals-while-cooperating-with-authorities/

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