Dakota Beacon

What do readers want to read? Something different? A bit offbeat? Unusual and maybe ever so quirky? Over the years The Passing Scene published many varied topics of interest to a variety of readers.

Last week’s topic, Bitcoin, fit that pattern. Readers certainly have heard of Bitcoin and other cryptocurrencies. But how much do they really grasp? Or even want to know? The answer straddles a line between curiosity and no interest at all. Reducing the topic to everyday language might raise interest.

Bitcoin as a topic generated inquisitive comments that gave me the idea for a different approach to cryptocurrency, that is, factors that seldom get discussed.

Without getting too “wonky” (The Passing Scene readers could lose interest fast), comments from readers inspired thoughts on the significance of cryptocurrency production. Maybe in the future we could wade through the actual construction of cryptocurrency. (Or maybe not.) But for now, readers might find the bigger picture more interesting. I am referring to the requirements for cryptocurrency production including resources, location, and environment.

Acknowledging our aversion to “wonkiness,” nevertheless, a few definitions will offer clarity in discussing resources and locations needed for cryptocurrency production.

--Blockchain:  A blockchain is a digital ledger book that records transactions across a network of computers in a way that is secure.

----Block:  Each block holds data , a timestamp, and a hash of the earlier block.

----Chain:  Blocks of data are linked chronologically forming a chain.

--Mining:  On a blockchain, mining is the validation of transactions.

--Hash:  Hashes confirm any transaction. The rate of generating hashes has increased using specialized hardware running complex algorithms. (See below.)

--Algorithm:  An algorithm is a step-by-step set of instructions or rules designed to perform a task. Think of it as a recipe in cooking that tells you exactly what to do and in what order to achieve a specific result.

Got it? Now, let’s continue to see the larger production picture. What follows are examples and implications of increased cryptocurrency production. Keep in mind these implications predate the artificial intelligence (AI) boom and all that it requires. The AI boom only adds to greater resource demand.

A 2023 International Monetary Fund working paper found that cryptocurrency mining could generate 450 million tons of CO₂ emissions by 2027. That would account for 1.2 percent of the world total. With more people entering the world of virtual currency, generating hashes for validation has become more complex. This in turn forces miners to invest large sums of money to improve computing performance. Consequently, finding a hash often does not justify the investment in electricity, equipment, and the cooling facilities to mitigate the heat the equipment produces.

Popular regions for mining include those with inexpensive electricity, a cold climate, and jurisdictions with clear and favorable regulations. By July 2019, bitcoin's electricity consumption was estimated to be approximately 7 gigawatts, around 0.2% of the global total, or equivalent to the energy consumed nationally by Switzerland in a year.

In February 2018, the Chinese government halted trading of virtual currency, banned initial coin offerings, and shut down mining. Consequently, Chinese miners moved to Canada and Texas. One company is running data centers for mining operations at Canadian oil and gas field sites to access low gas prices. In June 2018, Hydro Quebec proposed to the provincial government to distribute 500 megawatts of power to crypto companies for mining. According to a February 2018 report from Fortune, Iceland has become a haven for cryptocurrency miners in part because of its cheap electricity.

In March 2018, the city of Plattsburgh, New York put an 18-month moratorium on all cryptocurrency mining in an effort to preserve natural resources. In 2021, Kazakhstan became the second-biggest cryptocurrency mining country, producing 18.1% of the global exahash rate. (1 exahash = 1 quintillion hashes per second or 1,000,000,000,000,000,000 hashes. That requires a lot of computing power which requires a lot of electricity!) Kazakhstan built a compound containing 50,000 computers near the city of Ekibastuz to accomplish just that kind of mining.

Welcome to a paradigm shift into the unknown!

Dennis M. Patrick can be contacted at (JavaScript must be enabled to view this email address).