Bitcoin understanding mining

If you have any questions or would like to report a problem, please contact the AMF Information Centre or write to fintech lautorite. Go to menu Go to main content. Investments , current section Bitcoin and other virtual currencies , current sub-section Initial cryptocurrency or token offering ICO Cryptocurrency mining farms , current sub-section Tips for better investments Borrowing to invest?

Knowledgeable investors. What is a mining farm? For example, a promoter may: launch an initial cryptocurrency offering ICO ask investors to buy the computer equipment that will be housed and used for mining at the farm issue debt e. Who is this type of investment for? Warning Are you being asked to invest in a mining farm? End of the warning.

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Before investing in a cryptocurrency mining farm As an investor: Do you have a good knowledge of cryptocurrencies, blockchain and mining? What is your risk tolerance? These projects are often start-ups, so the risk of losing all the invested capital is very high. Did the promoters prepare and distribute a prospectus describing the investment in detail, or did they obtain an exemption? If they obtained an exemption, what are the exemption conditions? Who are the promoters? Are they experienced?

Bitcoin and cryptocurrency algorithms and implementation tutorial. | Toptal

Be skeptical of company documents claiming that the promoters have held positions at other companies, if no details are provided. Do a background check to see if they have ever been disciplined for improper business practices refer to Office de la protection du consommateur This link will open in a new window and SOQUIJ This link will open in a new window. How often will you receive information regarding your investment? Will investor meetings be held?

What Is Bitcoin Mining?

Is the mining farm already in operation? Is there a business plan? How long will it be before the farm turns a profit? Watch out for unfounded claims concerning the future success of the farm. If so, are they audited? How will the return on your investment be calculated? Figure 3 shows the results of the sensitivity analysis considering the three different electricity mixes and three different geographical distributions.

The main differences between the three different geographical distributions is largely explained by the different assumptions used in modeling the Chinese miners. The CCAF distribution assumes that The average electricity mix in China has a different impact than the average mix in Sichuan province, China. On average, 1MJ in China produces 0.

Introduction

The amount of cooling required for Bitcoin mining varies depending on climate, scale of mining facility, and mining equipment used. Improving the efficiency of mining equipment is likely to reduce the impact per TH. A decrease in lifetime of the mining equipment from 1.

While the attributional model answered the question on what was the past impact of the Bitcoin mining network under specific assumptions, the consequential models answer the question of how the carbon footprint would change by increasing the computing demand. Table 2 displays the impact of mining one additional TH for all the midpoint categories considered. The underlying model assumes that an increase in demand for electricity will be met by the marginal suppliers of electricity in each country.

1. What is Bitcoin Mining and How Does it Work? ( Updated).
2. Cryptocurrency for Dummies: Bitcoin and Beyond.
3. Cryptocurrency mining farms;
4. fork effect on bitcoin price;

The carbon footprint of mining one additional TH in the technology scenario assuming more efficient mining equipment was 7. Mining one additional TH in the location scenario leads to a carbon footprint of 3. Compared to the previous two scenarios the impact categories ozone depletion, marine ecotoxicity and freshwater ecotoxicity increase slightly see Table 2.

This shows that while the carbon footprint in the new locations decreases, renewable energies have higher impacts in other categories. This study showed that the location of the miners has the highest impact on the environmental impact of the Bitcoin network. Miners will move to locations where electricity prices are very low. Locations with very low electricity prices include those with unused electricity from hydropower e. The case of Plattsburg New York constitutes a recent example of how miners flocking to a city with cheap electricity can increase its energy consumption to the point where the city is no longer able to provide cheap electricity and has to import it from elsewhere.

One way to make sure that Bitcoin mining is truly sustainable would be if the miners established new capacity of renewable energy production ensuring that the marginal electricity consumption is environmentally friendly. One important challenge in the making of this study was the lack of reliable data sources.

Many references listed in this study come from news outlets and grey literature. While Bitcoin has gained a lot of attention in popular media, the academic literature on Bitcoin mining is scarce.

What is Bitcoin Mining?

Furthermore, the data in peer-reviewed literature is outdated 56,57 considering that in the past couple of months the Bitcoin network has grown substantially see Figure 2 and any data before late analyzed a much smaller system than the present one. Due to this scarce and diverging data basis it is important to highlight that this analysis and its results are characterized by an intrinsic uncertainty. Carrying out sensitivity analyses for all parameters was a way to make this uncertainty explicit and to provide an insight on the range of possible outcomes.

Further research should focus on a more solid base of data regarding miner location, and mining equipment used. This could be done using both expert interviews and a survey among the miners. Since these two parameters are major influencer of environmental impact, using even more accurate data would substantially decrease model uncertainties. Another possible way to increase the accuracy of the model is to consider the Bitcoin network as a whole and not focus on Bitcoin mining only. Such research should include impacts related to nonmining nodes and the growing number of off-chain transactions.

The inclusion of these factors was not coherent with the proposed model and therefore outside the scope of this study. A simple estimation of the lower bound of the energy consumption related to nonmining nodes carried out during this study showed that in nonmining nodes consumed 0. Details on the calculation used to derive this energy consumption is provided in SI Section 6.

Uncertainty of this calculation is high, though, as changing the assumptions regarding the computers used by the nodes could lead to a much higher impact, and this uncertainty should be addressed in future research. This analysis of the Bitcoin mining network contributes with a strictly technical perspective to the broader discussion on the sustainability of the international cryptocurrency.

The results should be considered in the larger context of a borderless currency that is difficult to regulate and where political and economic concerns play as important a role as technical and environmental ones. Bitcoin is not only difficult to regulate because it is a global currency, but also because of its governance structure. Any changes of protocol would have to be proposed by developers and then be supported by a sufficient number of miners and users 11 involving a large number of people in the process.

Therefore, it is important to remember socio-political aspects, but any discussion concerning regulation should be founded on a technical understanding. This analysis of the Bitcoin network is not transferable to all applications of blockchain but is limited to the Bitcoin PoW blockchain. The environmental impact of different kinds of blockchains that use a consensus mechanism other than PoW, such as proof-of-stake PoS , can be expected to be much lower since no electricity-intensive mining is necessary.

In order to add a new block in PoS, users who stake a certain amount of cryptocurrency are randomly selected. This study further adds a forward-looking perspective. The consequential model helps understanding the environmental impacts associated with future developments of the Bitcoin network.

The hashrate of the network is expected to continue growing. For example McCook 22 estimates this growth to be around 5. Growing mining efficiency is likely to increase the overall hashrate as a lower electricity consumption per TH means lower electricity costs for the miners. However, in the long term, the hashrate might stagnate as network security reaches a satisfactory level and rates of return for miners might decrease with the shift from Bitcoin rewards to transaction fees as the primary income.

Supporting Information.

What is Bitcoin Mining? (In Plain English)

Author Information. Consensus in the Age of Blockchains. Google Scholar There is no corresponding record for this reference. Change , August , — , DOI: Ssrn , 1 — 37 , DOI: Copyright in the Blockchain Era: Promises and Challenges. Law Secur. Energy Res. Change , 8 November , — , DOI: Joule , 2 5 , — , DOI: Is Bitcoin the Only Problem? DOI: Recent Developments in Life Ycle Assessment.

Bitcoin understanding mining
Bitcoin understanding mining
Bitcoin understanding mining
Bitcoin understanding mining
Bitcoin understanding mining
Bitcoin understanding mining