Which cities around the world see the most blockchain activity? It all depends upon what kind of activity you’re looking for, whether it’s conferences, investing, mining, commerce or something else.
We’ve scanned the landscape to identify some of the top cities for blockchain action in different areas.
Events
It should come as no surprise that the cities hosting top blockchain conferences and other big events are usually also global centres for finance and/or technology: Amsterdam, Bangalore, Dubai, Johannesburg, London, Moscow, New York, Paris, San Francisco, Singapore, Tokyo and Toronto.
But other cities have also made blockchain innovation an important part of their economic development programs. They include Austin, Texas, where the University of Texas at Austin’s McCombs School of Business has organised an April 13 conference on blockchain ‘Opportunities & Realities’; Kuala Lumpur, which will host Malaysia’s inaugural ‘Blocfest’ on May 8 and 9; and St. Julian’s, Malta, which will host the ‘Malta Blockchain Summit’ this November.
Investment
According to a recent analysis by Status Money, the US cities with the largest per-capita holdings in cryptocurrencies include Jacksonville, Florida; Memphis, Tennessee; Albuquerque, New Mexico; Charleston, South Carolina; Alpharetta, Georgia; Sunnyvale, California; Santa Clara, California; San Mateo, California; Torrance, California; and Manhattan, New York.
(For overall, rather than per-capita holdings, the top cities are Manhattan, Chicago, Jacksonville, San Francisco, Washington DC, and Los Angeles.)
San Francisco is also the global leader in initial coin offering activity, followed by Moscow, London, Singapore, New York, Los Angeles, Hong Kong, Tallinn, Berlin and Shanghai.
Bitcoin activity
Bitnodes’ regularly updated map shows that bitcoin nodes are heavily concentrated in several parts of the US, the UK and the midsection of Europe, with smaller hotspots in the Middle East, eastern and southeast Asia, Australia and the southern parts of Africa and South America.
In addition to the other top cities already noted above, metropolitan areas with lots of bitcoin activity include Bangkok, Cape Town, Copenhagen, Denver, Helsinki, Sao Paulo, Seoul, Sydney, Tel Aviv and Zurich.
Bitcoin-friendly
Coinmap lists more than 12,000 businesses around the world that accept bitcoin, litecoin, peercoin or opencoin, showing the largest concentrations in all the expected places like Bangkok, Berlin, Hong Kong, London, New York, San Francisco, and so on. Among other noteworthy cities where you can spend cryptocurrencies: Bogota; Brisbane; Chiniot, Pakistan; Honolulu; San Juan, Puerto Rico; Taipei; and Tenerife in the Canary Islands.
Cryptocurrency mining
In addition to reliable internet connectivity and high-speed networking capabilities, electricity costs are a big factor when it comes to finding the best locations for cryptocurrency mining. While China’s reliance on coal-fired power takes some of the blame for crypto’s high environmental footprint, the country also has ample hydroelectric power, which explains the concentration of miners in cities like Chengdu and smaller towns in the mountainous regions of Sichuan province.
Other areas with low-cost energy resources ideal for mining operations include Reykjavik; Tbilisi, Georgia; and Vancouver, Canada.
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Featured
Top cities for blockchain innovation, activity and investment
Opinion
09 Jul 2018
DSX Tech Team
Smart cities and blockchain: How will they work together?
Opinion
09 Jul 2018
DSX Tech Team
If you wanted to be glib, you could say blockchain and smart cities are a perfect combination because they have so much in common. They’re both nascent technologies that are wildly hyped as being the solution to, well, pretty much everything. Traffic congestion? Food supply challenges? Issues with responsive government? Just apply some blockchain and smart-city fixes, and — voila! — problem solved.
Get serious about both technologies, though, and it’s clear there’s some real potential for synergy in exciting new applications. We might not see those applications in action for some years to come yet, but — in time — the blockchain/smart-city combo could deliver significant benefits.
One logical area where they could work together is with the Internet of Things (IoT). For cities to become truly ‘smart’ they’ll need lots and lots of sensors and IoT devices to provide intelligent, automated, just-in-time services. That could be traffic lights whose timing is continually adapted to ensure optimum travel times or round-the-clock healthcare monitoring for the elderly. Meanwhile, keeping all of those many sensors and devices operating securely could be a job for blockchain.
Vaughan Emery, founder and CEO of the blockchain company Atonomi, wrote recently in The Hill: “Using blockchain… we have an opportunity to bring connectivity to scale without compromising security in the process.
“While IoT devices themselves lack the resources to host a blockchain, the immutability of the system coupled with cryptographic keys can be used to establish root identity for devices.”
Distributed ledger technology could also ensure that every action on the IoT is recorded for trouble-shooting or future auditing.
“Blockchain also offers powerful ledgering and audit capabilities through its inherent timestamp function,” Emery noted. “Whether opening a water valve or dispensing medication through an IV drip, whenever blockchain is involved you have a precise, and immutable, record of the event.”
Working together, blockchain and smart-city energy technologies could also pave the way for more resilient, cost-effective and sustainable ways of generating, distributing and consuming power via small-scale, distributed ‘microgrids’.
In a 2017 post for digital transformation company Brillio, management consultant Bhavya Suri wrote: “When one member of the microgrid generates excess energy (over and above what that member consumes), that energy is automatically routed to another member of the microgrid who needs energy via a ‘smart contract’ handled by blockchain.
“Essentially, the terms and parameters of a smart contract are set up (coded) in advance: ‘Whenever party A needs 10 kilowatts of electric power, party A is willing to pay up to this amount per kilowatt.’ If the energy is available, it will be priced according to all the smart contracts on the system, and be consumed.
“The smart contract eliminates the need for any intermediary, directly matching buyer and seller in real-time. The blockchain network performs a real-time peer-to-peer transaction, debiting the buyer and crediting the seller, and recording the transaction for posterity.”
DigitalTown, one company working to develop blockchain-based applications for smart cities, envisions a global network of online city portals in which citizens can use a single login to access not just government services but local goods and services as well.
Via this localised ‘Internet of People’, each city could offer citizens a blockchain-supported option of buying shares in its portal.
DigitalTown CEO Rob Monster said in a 2017 press statement: “Local ownership of a unified city platform provides the organising framework to regain control over the online economy, achieve self-sustaining economic development, and equip local stakeholders to win in the digital age.”
Blockchain could enable many other smart-city applications as well, according to IBM, which is working with cities such as Dubai to implement proofs of concept using both technologies. Among the possibilities: secure and verified access to digital health records, easier transfers of asset titles for more efficient trade, even blockchain-based programmes for tourist loyalty points.
Dr. Julia Glidden, general manager in IBM Global Business Services, writes in a January 2018 blog post: “Once the notion of blockchain citizen identity takes off it becomes entirely possible to imagine a world in which a citizen is literally able to build, control and maintain a complete and trusted audit trail of their own life journey — from birth through to death — and can carry it with them on a smart phone.
”If a citizen chooses, everything from registry of birth through to travel records, educational certificates and employment history can be uploaded to a blockchain, creating a secure, complete and easily accessible digital identity which they can control throughout their lives.”
Get serious about both technologies, though, and it’s clear there’s some real potential for synergy in exciting new applications. We might not see those applications in action for some years to come yet, but — in time — the blockchain/smart-city combo could deliver significant benefits.
One logical area where they could work together is with the Internet of Things (IoT). For cities to become truly ‘smart’ they’ll need lots and lots of sensors and IoT devices to provide intelligent, automated, just-in-time services. That could be traffic lights whose timing is continually adapted to ensure optimum travel times or round-the-clock healthcare monitoring for the elderly. Meanwhile, keeping all of those many sensors and devices operating securely could be a job for blockchain.
Vaughan Emery, founder and CEO of the blockchain company Atonomi, wrote recently in The Hill: “Using blockchain… we have an opportunity to bring connectivity to scale without compromising security in the process.
“While IoT devices themselves lack the resources to host a blockchain, the immutability of the system coupled with cryptographic keys can be used to establish root identity for devices.”
Distributed ledger technology could also ensure that every action on the IoT is recorded for trouble-shooting or future auditing.
“Blockchain also offers powerful ledgering and audit capabilities through its inherent timestamp function,” Emery noted. “Whether opening a water valve or dispensing medication through an IV drip, whenever blockchain is involved you have a precise, and immutable, record of the event.”
Working together, blockchain and smart-city energy technologies could also pave the way for more resilient, cost-effective and sustainable ways of generating, distributing and consuming power via small-scale, distributed ‘microgrids’.
In a 2017 post for digital transformation company Brillio, management consultant Bhavya Suri wrote: “When one member of the microgrid generates excess energy (over and above what that member consumes), that energy is automatically routed to another member of the microgrid who needs energy via a ‘smart contract’ handled by blockchain.
“Essentially, the terms and parameters of a smart contract are set up (coded) in advance: ‘Whenever party A needs 10 kilowatts of electric power, party A is willing to pay up to this amount per kilowatt.’ If the energy is available, it will be priced according to all the smart contracts on the system, and be consumed.
“The smart contract eliminates the need for any intermediary, directly matching buyer and seller in real-time. The blockchain network performs a real-time peer-to-peer transaction, debiting the buyer and crediting the seller, and recording the transaction for posterity.”
DigitalTown, one company working to develop blockchain-based applications for smart cities, envisions a global network of online city portals in which citizens can use a single login to access not just government services but local goods and services as well.
Via this localised ‘Internet of People’, each city could offer citizens a blockchain-supported option of buying shares in its portal.
DigitalTown CEO Rob Monster said in a 2017 press statement: “Local ownership of a unified city platform provides the organising framework to regain control over the online economy, achieve self-sustaining economic development, and equip local stakeholders to win in the digital age.”
Blockchain could enable many other smart-city applications as well, according to IBM, which is working with cities such as Dubai to implement proofs of concept using both technologies. Among the possibilities: secure and verified access to digital health records, easier transfers of asset titles for more efficient trade, even blockchain-based programmes for tourist loyalty points.
Dr. Julia Glidden, general manager in IBM Global Business Services, writes in a January 2018 blog post: “Once the notion of blockchain citizen identity takes off it becomes entirely possible to imagine a world in which a citizen is literally able to build, control and maintain a complete and trusted audit trail of their own life journey — from birth through to death — and can carry it with them on a smart phone.
”If a citizen chooses, everything from registry of birth through to travel records, educational certificates and employment history can be uploaded to a blockchain, creating a secure, complete and easily accessible digital identity which they can control throughout their lives.”
Is Dr Doom Right About Blockchain?
Opinion
09 Jul 2018
DSX Tech Team
Nouriel Roubini, the economist known as ‘Dr. Doom’ who foresaw the 2007/2008 housing bubble and crash, recently lambasted blockchain technology as another bubble. In an opinion piece co-written with economist Preston Byrne, they said that “blockchain might just be the most over-hyped technology of all time”.
But just how on target are Roubini and Byrne’s accusations? The blockchain economy is still young enough that some criticisms of the technology could risk one day sounding like previous doubters’ comments about computers.
Consider IBM chairman Thomas Watson who in 1943 predicted: “I think there is a world market for maybe five computers.” Meanwhile, a 1995 assessment by 3Com founder Robert Metcalfe (“I predict the Internet will soon go spectacularly supernova and in 1996 catastrophically collapse”) hasn’t aged well either.
As the old saying goes, “It is difficult to make predictions, especially about the future.”
Photo by Jimi Filipovski on Unsplash
So is blockchain overhyped? There are certainly examples to support that observation. (Exhibit 1: The fake cryptocurrency whose graphic designer bio featured a stock photo of actor Ryan Gosling.)
However, there are also so many examples of applications where blockchain could revolutionise things, it doesn’t make sense to dismiss the technology wholesale.
Some of the criticisms leveled at blockchain stem from the fact that it is — as New York Times Magazine writer Steven Johnson puts it — “demonically challenging to understand.” A response to Roubini and Byrne’s opinion piece by the World Economic Forum notes that “because this technology is foundational in nature, it could be a while before we see its widespread adoption”.
It adds: “However, many others see the hype around this technology as something of a bubble in and of itself.”
Max Gulker, a senior research fellow at the American Institute for Economic Research, leans towards the Roubini and Byrne position. In an article titled, ‘Yes, Dr. Roubini, Blockchain is Overhyped — and That’s a Good Thing’, Gulker concedes that blockchain has drawbacks when it comes to speed, data storage needs and energy consumption. The problem, he says, is that the technology doesn’t have to revolutionise everything to be viable in many applications.
In addition, Gulker adds: “Treating overhype in a purely pejorative sense ignores the evolutionary process of markets.”
“At its core, overhype is often the manifestation of entrepreneurs competing for investors,” he adds. “On a micro level, one can predict that a specific coin will fail, and probably be right. On a more macro level, this competitive process allows the market to find applications for a new technology that not even someone as prescient as Dr. Roubini could predict in advance.
“Blockchain startups may be individually extremely risky investments but competition is necessary to converge on the uses that most benefit society. So bring on the hype!”
But just how on target are Roubini and Byrne’s accusations? The blockchain economy is still young enough that some criticisms of the technology could risk one day sounding like previous doubters’ comments about computers.
Consider IBM chairman Thomas Watson who in 1943 predicted: “I think there is a world market for maybe five computers.” Meanwhile, a 1995 assessment by 3Com founder Robert Metcalfe (“I predict the Internet will soon go spectacularly supernova and in 1996 catastrophically collapse”) hasn’t aged well either.
As the old saying goes, “It is difficult to make predictions, especially about the future.”
Photo by Jimi Filipovski on Unsplash
So is blockchain overhyped? There are certainly examples to support that observation. (Exhibit 1: The fake cryptocurrency whose graphic designer bio featured a stock photo of actor Ryan Gosling.)
However, there are also so many examples of applications where blockchain could revolutionise things, it doesn’t make sense to dismiss the technology wholesale.
Some of the criticisms leveled at blockchain stem from the fact that it is — as New York Times Magazine writer Steven Johnson puts it — “demonically challenging to understand.” A response to Roubini and Byrne’s opinion piece by the World Economic Forum notes that “because this technology is foundational in nature, it could be a while before we see its widespread adoption”.
It adds: “However, many others see the hype around this technology as something of a bubble in and of itself.”
Max Gulker, a senior research fellow at the American Institute for Economic Research, leans towards the Roubini and Byrne position. In an article titled, ‘Yes, Dr. Roubini, Blockchain is Overhyped — and That’s a Good Thing’, Gulker concedes that blockchain has drawbacks when it comes to speed, data storage needs and energy consumption. The problem, he says, is that the technology doesn’t have to revolutionise everything to be viable in many applications.
In addition, Gulker adds: “Treating overhype in a purely pejorative sense ignores the evolutionary process of markets.”
“At its core, overhype is often the manifestation of entrepreneurs competing for investors,” he adds. “On a micro level, one can predict that a specific coin will fail, and probably be right. On a more macro level, this competitive process allows the market to find applications for a new technology that not even someone as prescient as Dr. Roubini could predict in advance.
“Blockchain startups may be individually extremely risky investments but competition is necessary to converge on the uses that most benefit society. So bring on the hype!”
Is Dr Doom Right About Blockchain?
Opinion
09 Jul 2018
DSX Tech Team
Nouriel Roubini, the economist known as ‘Dr. Doom’ who foresaw the 2007/2008 housing bubble and crash, recently lambasted blockchain technology as another bubble. In an opinion piece co-written with economist Preston Byrne, they said that “blockchain might just be the most over-hyped technology of all time”.
But just how on target are Roubini and Byrne’s accusations? The blockchain economy is still young enough that some criticisms of the technology could risk one day sounding like previous doubters’ comments about computers.
Consider IBM chairman Thomas Watson who in 1943 predicted: “I think there is a world market for maybe five computers.” Meanwhile, a 1995 assessment by 3Com founder Robert Metcalfe (“I predict the Internet will soon go spectacularly supernova and in 1996 catastrophically collapse”) hasn’t aged well either.
As the old saying goes, “It is difficult to make predictions, especially about the future.”
Photo by Jimi Filipovski on Unsplash
So is blockchain overhyped? There are certainly examples to support that observation. (Exhibit 1: The fake cryptocurrency whose graphic designer bio featured a stock photo of actor Ryan Gosling.)
However, there are also so many examples of applications where blockchain could revolutionise things, it doesn’t make sense to dismiss the technology wholesale.
Some of the criticisms leveled at blockchain stem from the fact that it is — as New York Times Magazine writer Steven Johnson puts it — “demonically challenging to understand.” A response to Roubini and Byrne’s opinion piece by the World Economic Forum notes that “because this technology is foundational in nature, it could be a while before we see its widespread adoption”.
It adds: “However, many others see the hype around this technology as something of a bubble in and of itself.”
Max Gulker, a senior research fellow at the American Institute for Economic Research, leans towards the Roubini and Byrne position. In an article titled, ‘Yes, Dr. Roubini, Blockchain is Overhyped — and That’s a Good Thing’, Gulker concedes that blockchain has drawbacks when it comes to speed, data storage needs and energy consumption. The problem, he says, is that the technology doesn’t have to revolutionise everything to be viable in many applications.
In addition, Gulker adds: “Treating overhype in a purely pejorative sense ignores the evolutionary process of markets.”
“At its core, overhype is often the manifestation of entrepreneurs competing for investors,” he adds. “On a micro level, one can predict that a specific coin will fail, and probably be right. On a more macro level, this competitive process allows the market to find applications for a new technology that not even someone as prescient as Dr. Roubini could predict in advance.
“Blockchain startups may be individually extremely risky investments but competition is necessary to converge on the uses that most benefit society. So bring on the hype!”
But just how on target are Roubini and Byrne’s accusations? The blockchain economy is still young enough that some criticisms of the technology could risk one day sounding like previous doubters’ comments about computers.
Consider IBM chairman Thomas Watson who in 1943 predicted: “I think there is a world market for maybe five computers.” Meanwhile, a 1995 assessment by 3Com founder Robert Metcalfe (“I predict the Internet will soon go spectacularly supernova and in 1996 catastrophically collapse”) hasn’t aged well either.
As the old saying goes, “It is difficult to make predictions, especially about the future.”
Photo by Jimi Filipovski on Unsplash
So is blockchain overhyped? There are certainly examples to support that observation. (Exhibit 1: The fake cryptocurrency whose graphic designer bio featured a stock photo of actor Ryan Gosling.)
However, there are also so many examples of applications where blockchain could revolutionise things, it doesn’t make sense to dismiss the technology wholesale.
Some of the criticisms leveled at blockchain stem from the fact that it is — as New York Times Magazine writer Steven Johnson puts it — “demonically challenging to understand.” A response to Roubini and Byrne’s opinion piece by the World Economic Forum notes that “because this technology is foundational in nature, it could be a while before we see its widespread adoption”.
It adds: “However, many others see the hype around this technology as something of a bubble in and of itself.”
Max Gulker, a senior research fellow at the American Institute for Economic Research, leans towards the Roubini and Byrne position. In an article titled, ‘Yes, Dr. Roubini, Blockchain is Overhyped — and That’s a Good Thing’, Gulker concedes that blockchain has drawbacks when it comes to speed, data storage needs and energy consumption. The problem, he says, is that the technology doesn’t have to revolutionise everything to be viable in many applications.
In addition, Gulker adds: “Treating overhype in a purely pejorative sense ignores the evolutionary process of markets.”
“At its core, overhype is often the manifestation of entrepreneurs competing for investors,” he adds. “On a micro level, one can predict that a specific coin will fail, and probably be right. On a more macro level, this competitive process allows the market to find applications for a new technology that not even someone as prescient as Dr. Roubini could predict in advance.
“Blockchain startups may be individually extremely risky investments but competition is necessary to converge on the uses that most benefit society. So bring on the hype!”
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How To Solve Blockchain's Energy Problem
How To Solve Blockchain's Energy Problem
Blog
09 Jul 2018
DSXT
While the wild rise and fall of bitcoin prices in late 2017 generated a heavy stream of ‘bubble mania’ stories in tech, finance and even mainstream news outlets, the cryptocurrency also found itself a target of criticism for its growing energy footprint.
Blockchain acquired its ‘energy hog’ label after Digiconomist’s Bitcoin Energy Consumption Index calculated that the digital currency’s mining process was — according to its most recent estimate — using as much electricity as the entire nation of Algeria: more than 57 terawatt-hours annually.
And with so much bitcoin mining concentrated in China, which remains highly dependent on coal, that finding suggested cryptocurrencies can create a lot of environmental and climate damage.
However, there are a few caveats to those findings. One, as even Digiconomist acknowledges, is that the bitcoin energy index is based on a few assumptions rather than on actual energy consumption data, although the site also notes many of those assumptions are on the conservative side.
The second caveat is that bitcoin’s large energy footprint fluctuates depending upon price. Miners are willing to pay more for equipment and associated energy costs when the financial rewards are higher. As a result, consumption was bound to be higher when prices were flirting with $20,000 a coin, as opposed to the current $8,000-a-coin range.
Thirdly, there are alternatives to the energy-intensive proof-of-work algorithm that is currently used to mine bitcoins and some are already being used by other cryptocurrencies.
The most promising alternative at the moment is proof of stake, which — like proof of work — can provide a consensus that each bitcoin transaction is valid and doesn’t involve double-spending. Proof of stake uses validators rather than miners to confirm transactions, with validators determined based on how many bitcoins they already own and no block reward for mining (instead, the reward is transaction fees).
Validators are chosen deterministically and new coins don’t have to be mined into existence through intensive computations, so the process of reaching consensus involves less time and energy.
Beyond proof of stake, there are other alternatives to proof of work: proof of burn, proof of capacity, proof of activity and proof of elapsed time. However, proof of stake appears closest to seeing real-world implementation in the wider blockchain world.
In November, for example, Ethereum creator Vitalik Buterin said his currency’s community might soon switch to a proof-of-stake system to improve sustainability.
Several other cryptocurrencies already use proof of stake in some form, including Peercoin, Nxt, BlackCoin and Decred.
Peercoin launched in 2012 and uses a hybrid system with both proof of work and proof of stake. In their founding paper for Peercoin, creators Sunny King and Scott Nadal said their system was explicitly designed to avoid the sustainability problems of bitcoin, both financial and energy-related.
“When the proof-of-work mint rate approaches zero, there is less and less incentive to mint proof-of-work blocks,” they wrote. “Under this long-term scenario, energy consumption in the network may drop to very low levels as disinterested miners stop mining proof-of-work blocks.
“The bitcoin network faces such risk unless transaction volume/fee rises to high enough levels to sustain the energy consumption. Under our design even if energy consumption approaches zero the network is still protected by proof-of-stake. We call a cryptocurrency long-term energy-efficient if energy consumption on proof-of-work is allowed to approach zero.”
Another solution to the blockchain energy consumption problem might lie with hardware rather than software. In 2017, Cornell University researchers proposed a proof-of-useful-work system for resource-efficient blockchain mining based on Intel’s Software Guard Extensions. They claimed their proposal improved on Intel’s own Hyperledger Sawtooth blockchain code by encouraging use of the fastest processors possible for block-writing.
How To Solve Blockchain's Energy Problem
How To Solve Blockchain's Energy Problem
Blog
09 Jul 2018
DSXT
While the wild rise and fall of bitcoin prices in late 2017 generated a heavy stream of ‘bubble mania’ stories in tech, finance and even mainstream news outlets, the cryptocurrency also found itself a target of criticism for its growing energy footprint.
Blockchain acquired its ‘energy hog’ label after Digiconomist’s Bitcoin Energy Consumption Index calculated that the digital currency’s mining process was — according to its most recent estimate — using as much electricity as the entire nation of Algeria: more than 57 terawatt-hours annually.
And with so much bitcoin mining concentrated in China, which remains highly dependent on coal, that finding suggested cryptocurrencies can create a lot of environmental and climate damage.
However, there are a few caveats to those findings. One, as even Digiconomist acknowledges, is that the bitcoin energy index is based on a few assumptions rather than on actual energy consumption data, although the site also notes many of those assumptions are on the conservative side.
The second caveat is that bitcoin’s large energy footprint fluctuates depending upon price. Miners are willing to pay more for equipment and associated energy costs when the financial rewards are higher. As a result, consumption was bound to be higher when prices were flirting with $20,000 a coin, as opposed to the current $8,000-a-coin range.
Thirdly, there are alternatives to the energy-intensive proof-of-work algorithm that is currently used to mine bitcoins and some are already being used by other cryptocurrencies.
The most promising alternative at the moment is proof of stake, which — like proof of work — can provide a consensus that each bitcoin transaction is valid and doesn’t involve double-spending. Proof of stake uses validators rather than miners to confirm transactions, with validators determined based on how many bitcoins they already own and no block reward for mining (instead, the reward is transaction fees).
Validators are chosen deterministically and new coins don’t have to be mined into existence through intensive computations, so the process of reaching consensus involves less time and energy.
Beyond proof of stake, there are other alternatives to proof of work: proof of burn, proof of capacity, proof of activity and proof of elapsed time. However, proof of stake appears closest to seeing real-world implementation in the wider blockchain world.
In November, for example, Ethereum creator Vitalik Buterin said his currency’s community might soon switch to a proof-of-stake system to improve sustainability.
Several other cryptocurrencies already use proof of stake in some form, including Peercoin, Nxt, BlackCoin and Decred.
Peercoin launched in 2012 and uses a hybrid system with both proof of work and proof of stake. In their founding paper for Peercoin, creators Sunny King and Scott Nadal said their system was explicitly designed to avoid the sustainability problems of bitcoin, both financial and energy-related.
“When the proof-of-work mint rate approaches zero, there is less and less incentive to mint proof-of-work blocks,” they wrote. “Under this long-term scenario, energy consumption in the network may drop to very low levels as disinterested miners stop mining proof-of-work blocks.
“The bitcoin network faces such risk unless transaction volume/fee rises to high enough levels to sustain the energy consumption. Under our design even if energy consumption approaches zero the network is still protected by proof-of-stake. We call a cryptocurrency long-term energy-efficient if energy consumption on proof-of-work is allowed to approach zero.”
Another solution to the blockchain energy consumption problem might lie with hardware rather than software. In 2017, Cornell University researchers proposed a proof-of-useful-work system for resource-efficient blockchain mining based on Intel’s Software Guard Extensions. They claimed their proposal improved on Intel’s own Hyperledger Sawtooth blockchain code by encouraging use of the fastest processors possible for block-writing.
Blockchain acquired its ‘energy hog’ label after Digiconomist’s Bitcoin Energy Consumption Index calculated that the digital currency’s mining process was — according to its most recent estimate — using as much electricity as the entire nation of Algeria: more than 57 terawatt-hours annually.
And with so much bitcoin mining concentrated in China, which remains highly dependent on coal, that finding suggested cryptocurrencies can create a lot of environmental and climate damage.
However, there are a few caveats to those findings. One, as even Digiconomist acknowledges, is that the bitcoin energy index is based on a few assumptions rather than on actual energy consumption data, although the site also notes many of those assumptions are on the conservative side.
The second caveat is that bitcoin’s large energy footprint fluctuates depending upon price. Miners are willing to pay more for equipment and associated energy costs when the financial rewards are higher. As a result, consumption was bound to be higher when prices were flirting with $20,000 a coin, as opposed to the current $8,000-a-coin range.
Thirdly, there are alternatives to the energy-intensive proof-of-work algorithm that is currently used to mine bitcoins and some are already being used by other cryptocurrencies.
The most promising alternative at the moment is proof of stake, which — like proof of work — can provide a consensus that each bitcoin transaction is valid and doesn’t involve double-spending. Proof of stake uses validators rather than miners to confirm transactions, with validators determined based on how many bitcoins they already own and no block reward for mining (instead, the reward is transaction fees).
Validators are chosen deterministically and new coins don’t have to be mined into existence through intensive computations, so the process of reaching consensus involves less time and energy.
Beyond proof of stake, there are other alternatives to proof of work: proof of burn, proof of capacity, proof of activity and proof of elapsed time. However, proof of stake appears closest to seeing real-world implementation in the wider blockchain world.
In November, for example, Ethereum creator Vitalik Buterin said his currency’s community might soon switch to a proof-of-stake system to improve sustainability.
Several other cryptocurrencies already use proof of stake in some form, including Peercoin, Nxt, BlackCoin and Decred.
Peercoin launched in 2012 and uses a hybrid system with both proof of work and proof of stake. In their founding paper for Peercoin, creators Sunny King and Scott Nadal said their system was explicitly designed to avoid the sustainability problems of bitcoin, both financial and energy-related.
“When the proof-of-work mint rate approaches zero, there is less and less incentive to mint proof-of-work blocks,” they wrote. “Under this long-term scenario, energy consumption in the network may drop to very low levels as disinterested miners stop mining proof-of-work blocks.
“The bitcoin network faces such risk unless transaction volume/fee rises to high enough levels to sustain the energy consumption. Under our design even if energy consumption approaches zero the network is still protected by proof-of-stake. We call a cryptocurrency long-term energy-efficient if energy consumption on proof-of-work is allowed to approach zero.”
Another solution to the blockchain energy consumption problem might lie with hardware rather than software. In 2017, Cornell University researchers proposed a proof-of-useful-work system for resource-efficient blockchain mining based on Intel’s Software Guard Extensions. They claimed their proposal improved on Intel’s own Hyperledger Sawtooth blockchain code by encouraging use of the fastest processors possible for block-writing.
