Quantum Computers Could Help Slash The Energy Use of Cryptocurrencies

Mining of cryptocurrency is the process by which new coins are created, and transactions are verified, requiring substantial computational power. It is often an energy-intensive activity that takes a huge amount of power out of the grid, and it remains a contentious issue amongst environmentalists and crypto critics. However, market analysts point out that the energy consumption of Bitcoin is minuscule compared to that of traditional financial institutions.

According to data made available by the International Energy Agency (IEA), and quoted by Forbes Advisor, the banking system consumes over 200 terawatt-hours (TWh) of electricity annually, whereas bitcoin mining uses only 127 TWh. While there is a big difference between the two figures, the energy consumed by crypto mining is nonetheless huge and raises concerns. That usage exceeds the entire annual electricity consumption of countries like Norway and Sweden. More so, Bitcoin uses 707 kilowatt-hours (kWh) of electricity per transaction, which is 11 times that of Ethereum. Unlike Bitcoin’s ‘proof of work’ technique, Ethereum uses “proof of stake” which requires less energy to operate.

A recent study by two researchers at the University kg Kent’s School of Computing, UK shows the mining of existing cryptocurrencies like bitcoin could be done using quantum computers, cutting their electricity use by 90 per cent. Mind you, cryptocurrencies that rely on a “proof of work” method perform computationally intensive calculations to produce new coins and certify transactions, at great energy cost. 

How Does Crypto Mining Consume Energy?

The energy use of cryptocurrencies say the bitcoin network, is a function of a few inter-related factors (like the changing price of bitcoin):

• mining hardware specifications, notably power consumption and hash rate;

• network hash rate, the combined rate at which all miners on the network are simultaneously guessing solutions to the puzzle;

• difficulty” of solving the puzzle, which is adjusted in response to the network hash rate to maintain the target block rate of one block every 10 minutes; and

• energy consumption by non-IT infrastructure, such as cooling and lighting.

The rising price of bitcoin, particularly as it rose to all-time highs in December 2017, drove huge increases in hash rate and difficulty, and the development and deployment of more powerful and energy-efficient mining hardware.

What is Quantum Computing?

Quantum computing is a burgeoning or fast-emerging technology specially designed for solving problems too complex for classical computers. Unlike classical computers, which use bits to represent information as 0s and 1s, quantum computers use qubits, which can simultaneously exist in multiple states.

While it is still an up-and-coming technology, it has the potential to revolutionize various industries, including the world of cryptocurrencies. 

Does Quantum Have an Impact on Crypto Security?

But there are serious concerns about it being a threat to current encryption methods which have been dismissed by popular crypto mining centers.  For instance, cracking the encryption that safeguards Bitcoin would require inordinate amounts of quantum computing power to be deployed together and controlled by a single entity that orchestrates the attack. 

According to researchers at the University of Sussex, a quantum computer with 1.9 billion qubits of processing power would be needed to break into the Bitcoin network within 10 minutes. This would require hackers to deploy millions of quantum computers, a scenario that is highly unlikely for the foreseeable future.

Conversely, quantum computers have the potential to break these encryption algorithms. If one can develop a powerful enough quantum computer, one could potentially decrypt encrypted communications, access confidential data, and undermine the integrity of digital systems that rely on cryptographic algorithms.

How Do We Guard Against This?

To combat this threat, one possible approach is the development of quantum-resistant cryptographic algorithms. These algorithms could withstand attacks from both classical and quantum computers, ensuring the longevity and durability of cryptographic security even in the face of quantum advancements. Minus the perceived fears that have been dismissed by many, Quantum computing does offer opportunities for the crypto industry to adapt and innovate. 

Some environmentalists have begun voicing concerns publicly over the huge amount of energy consumed by mining. Due to energy costs (among other things), some newer cryptocurrency networks are in the process of moving from “proof of work” used by Bitcoin, to “proof of stake” which is a less energy-intensive or less power-hungry technique. 

Proof of work and proof of stake are the two most popular ways of processing cryptocurrency transactions. But Proof-of-work often requires people to solve complex cryptographic puzzles — which can incur significant energy costs — before they're allowed to propose a new block. This high energy usage of course translates to huge spending annually and has a notable impact on global carbon emissions hence why quantum computing is proposed as a better alternative.