The fever of cryptocurrencies continues to increase throughout the planet. The market capitalization of cryptocurrencies has already surpassed $3 trillion. This is huge considering that the price of Bitcoin at the beginning of 2022 was almost double what it was a year ago. Many more people are investing in cryptocurrencies, which means more pressure on developers to create more efficient and less harmful cryptocurrency mining alternatives..
Ever since OG, the creator of them all, also known as Bitcoin, was first introduced, there have been consensus mechanisms or 'agreement methods'. The early days of blockchain thrived on these mechanisms. And they have always been synonymous with mining requiring proof of work, at least until now.
Mining is the method through which Bitcoin and various other cryptocurrencies mint or produce new coins and validate recent transactions. It involves the use of a room full of computers located around the world to verify and safeguard the blockchains (chains of blocks). These in turn help create virtual accounts that record these transactions and verify them in a matter of minutes..
Computers running on that network are rewarded with new coins for their constant contribution that keeps the entire system alive and secure.
What is the importance of mining?
Mining is crucial not only for the security of Bitcoin (and many other cryptocurrencies), but also for bringing new coins into circulation. It protects and validates the blockchain, allowing cryptocurrencies to operate as a distributed network without a single authority taking control. It gives miners an incentive to offer their processing resources to the network..
However, with growing concerns about the mining process, cryptocurrencies have moved away from their traditional ways.
Mining and its impact on the environment
The increase in the price of cryptocurrencies has caused a frenzy of demand, attracting millions of people to try their luck with cryptocurrencies, without understanding or considering the environmental consequences.
Operations, like Bitcoin, require a ton of energy for each transaction and 'mining' new coins is a huge threat to the environment. The amount of energy required varies depending on the cryptocurrency. Bitcoin being the OG requires a lot more than usual and a lot more than some new players on the block like Caduceus ($CMP).
Are there any alternatives in cryptocurrency mining?
In response to this criticism, Ethereum has taken the lead in switching from a Proof-of-Work (PoW) system to a Proof-of-Stake (PoS) system. This chooses a random person to solve the block, significantly reducing energy use by 99 percent.