In this video, we'll look at the second showstopper of implementing blockchain. You may remember the proof of work consensus mechanism used by the Bitcoin Blockchain. This mechanism ensures network security. To hack the Bitcoin network, hacker would need more computing power than the rest of the Bitcoin network combined. A hacker would have to overpower the network in broad daylight. So, these protocols are not only the unique building blocks, they are critical building blocks of people's trust in the system. As amazing as these blockchain protocols are, they pose a big problem. The energy used to show proof of work is significant, and if it scales linearly, it will be unsustainable. Let's delve deeper into the amount of processing power we're talking about. This might get a bit technical, but bear with me, the reward is worth it. Hashing, the process of digesting transactions through the secure hash algorithm, known as SHA-256, and solving a block, burns a lot of electricity. Estimates like in the Bitcoin networks' energy consumption is more than 4.41 billion kilowatt hours, a Godzilla-sized carbon footprint. As early as 2015, the combined processing power of the Bitcoin network was hundreds of times greater than the total output of the world's top 500 supercomputers. Think about that power. Critics suggests that we could be using it to cure cancer or explore the stars, instead, we're using it to process Bitcoin transactions. It turns out that Bitcoin serves a vital role in many people's lives, and mining it uses over 70 percent renewable energy. But even when you factor in these clear benefits, it's still expensive. Here's the basic rule of thumb for cost. For every dollar computer burns up in electricity, it needs $0.50 to cool down. Processing and protecting the more than $60 billion worth of Bitcoin in circulation actually requires hundreds of millions of dollars in electricity every single year. Previously, we liked the mining Bitcoin to mining gold. These two rare and precious resources share another similarity. They require an intense amount of energy to form the asset. As citizens who care about our planet, we need to find the best way to solve for the electricity needed to run and cool the computers mining Bitcoin and securing the Bitcoin network. Hash rate is only one way to measure the processing power of the Bitcoin network. Remember, when a miner finds the hash with the correct number of zeros, that miner shares the proof of work with other miners in the network. The other miner signal their acceptance by rushing to work on the next block. So, let's say there are millions of transactions per block. Each is paying an average transaction fee of one dollar, so the miners will receive millions of dollars per block. They would also spend a little less than that to do the work. The amount of hashing has driven the difficulty level which adjusts on average every two weeks, though not always exact difficulty levels generally follow the same trend line as price. The hash rate has risen significantly since Bitcoin's inception. As it increases, the trend is towards using more energy, not less. When we get down to it, all forms of money have a relationship to energy. We just have to decide if the blockchain is worth the costs. The second energy-related issue is computer architecture. The Bitfury Group has built a Bitcoin solver with application specific integrated circuits, or ASICs. These are energy efficient designed solely to mine Bitcoin. Another environmentally friendly factor is the location of the mining equipment. Relocating to cooler climates may help. Although these initiatives may limit mining carbon footprint, miners who want to make a career of it must continually to upgrade their systems. Most mining equipment remains competitive for less than a year. Firms like Bitfury or like those Yukon shopkeepers during the great California Gold rush. They make their real fortune by selling better and better shuffles to the miners. New approaches to recycling computer parts are in development, but there's still not available to most consumers. If Bitcoin truly becomes a global network for payments, some developers believe they'll need to move away from proof of work as a security measure and find an alternative mechanism. So, other networks such as Ethereum or EOS have explored other consensus algorithms like proof of stake to secure the network while retaining decentralization. Remember, the purpose of consensus algorithms is to allocate the right to decide the state of the blockchain network to a decentralized set of users. We don't want a centralized set of decision-makers. Vitalik Buterin, co-creator of Ethereum, sees only three securely decentralized sets of users. Each set corresponds to a type of consensus algorithm. The first set is owners of computing power with standard proof of work algorithm. The second set is stakeholders with various proof of stake algorithms. The third set is members of a social network with a federated style consensus algorithm. These systems don't burn electricity as the blockchain does for Bitcoin. The fourth way to address energy waste is proof of disk, where owners of disk storage space define the economic set of users. Seemingly, daily clever inventors are creating new ways of building consensus without the cost of the elements of proof of work, but some experts caution against these alternatives to proof of work. It's a new era of computer science. It might not only malfunction, but also required constant checking. To sum it up, the choice of consensus algorithm must achieve two goals. One, it must keep the network secure, and two, it must distribute the decision on network status widely to the most appropriate decentralized economic set. The western idiom, "If there's a will, there's a way" applies here. The smartest technologists on the planet are working on creative solutions to the energy problem. Those include more efficient devices and greater use of renewable energy. As computers with artificial intelligence becomes smarter, so too will the solutions that they provide.
