Thanks to Babbel, a language learning  app, for sponsoring this episode.

If  you’re interested in growing your  language skills, SciShow viewers get up  to 65% off with a 20 day money-back  guarantee when you use our link.  The ways that we live our lives online  are changing very fast. When I first  got on the internet, no one was  predicting a world anything like the one  we are living in today.

The tools that have made that possible,   for good and bad, are really cool and advanced and, for the most part,   we do not understand them that well.  Like, most of us don’t really know  what “http” means let alone what impact  inviting billions of people into  many-to-many communication has had and  will continue to have on society. But that does not mean we’re stopping the   changing…or even slowing it down.  Here’s what I’ll say to start…blockchains are   controversial. Controversial because of how they are used,   what they enable, and the impacts that they are having and may have on our world.  And when something is the subject of  controversy, the expectation is that  everyone should have an opinion.  But in this case, we at SciShow, are  not offering an opinion.

Instead, we  want to interface with a reality….these  tools exist, they are not going to  stop existing, and they are often  extremely energy inefficient,  but maybe they don’t need to be.  First though, let’s define some  of what we’re talking about.  This technology is fairly new, as far  as the whole history of digital tech is  concerned, but is quickly  becoming more and more popular.  Cryptocurrencies are a kind of digital  currency that’s transferred and  tracked and authenticated by a  distributed network of users rather than  something like a centralized bank.  The idea of a cryptocurrency is that  each unit of the currency is interchangeable…  just like a dollar is a dollar,  a bitcoin is a bitcoin. They’re all  identical and worth the exact same  amount. There’s a word for  this… they are “fungible.”  NFTs are… non-fungible tokens.

They  are also just information stored  on a ledger maintained by a distributed  network of users, but each NFT is  different and not interchangeable.  This means you can have them contain  information, like saying, “This token  represents ownership of this piece of  digital art… or this token represents ownership of   1% of the rights to a song.”  How people use them is legally complex,  but basically they’re just notes  on a ledger that can be marked as  being owned by a person…or wallet.  Now the real secret sauce to  both cryptocurrencies and NFTs is  blockchain: a digital ledger that keeps  track of all the transactions made,  and thus who owns what. Because, like, we’re all aware   that you can easily make digital copies of something. Like if you have a movie file,   and you send it to me, we both have the movie file.

But if you   have a dollar, and you send it to me, we don’t both have the dollar. We need a   system to keep track of where the dollar is and prevent people   from making infinite copies of them. This is what makes blockchains a valuable tool.  The blockchain is a public ledger  that is stored on many many computers  all over the world.

Everyone who  mines bitcoin has the exact same copy  of the ledger…which is the blockchain.  And the blockchain has a record of  every single transaction of that  currency that has ever happened. As more  transactions happen, the blockchain  keeps getting longer. Currently, the  bitcoin blockchain is around 400  gigabytes.

So, big, but maybe not as big  as you’d think. So bitcoins are not files…they are   notes on a file that lots of people have access to and keep track of.  Because everyone has a copy of the  blockchain, no one can change it in  one place without getting caught  by all of the other people.  But also, you need to be able to  add new transactions to the ledger,  because part of the whole point  is moving these representations of  ownership around. And you don’t just  want anybody to be able to do it.  If you want to go deeper on how all  of this works, our video from 2016,  when the ledger was just 100 gigs,  is still very good and still totally  applicable.

But, basically, to add a  transaction to the ledger, you have to  solve super complex math problems. And, if you do that…you solve the   problem, and you add a new block of transactions to the chain. As a reward   you get a bit of the underlying currency of the blockchain.  This is what people are talking  about when they say they are mining  crypto.

They are maintaining the  ledger, and adding new blocks of  transactions, and verifying those  transactions. Each block is verified by  several users, so it’s almost impossible  to forge a transaction….but you  don’t get to do any of that unless  you’re the one solving the super  complex math problems. You can’t  make money mining if you don’t solve  the problems first.

So people are in  an arms race to solve these problems  very quickly. But the math problem   only exists to make it inherently expensive to add and verify transactions… so expensive that it is   impossible for a bunch of hackers to work together   to add false transactions. Since some cryptos are now   worth a fair chunk of change, there’s more incentive for people to join the mining race.  Enter the environmental impact.

These  math problems are inherently and  intentionally tough to solve. People  are competing with each other to  solve them, and so there is  tremendous economic incentive to buy  extremely expensive, state of the  art computer hardware, and use a  tremendous amount of energy to  solve useless math problems so that  you can be the one who adds  the blocks and makes the money.  And depending on how that power  is generated, that means a lot of  carbon emissions. On top of all that, mining and all this   hardcore computing generate a lot of electronic waste.  So the question becomes whether it’s  possible to reduce energy demand,  waste, and overall footprint for cryptocurrencies.

When it comes to crypto, miners need to have   a lot of computing power because, the more power   you have, the quicker you can make guesses and the more likely you are to be the one to   solve the problem and get the cash.  NFTs run into the same problem  because they are also often stored on  ledgers that use this same system  and are bought and sold with  cryptocurrencies. Now, numbers on this aren’t   super easy to get, but they are mind boggling. Research done by the   University of Cambridge in the UK estimated that as of November 2018   the top six cryptocurrencies consumed between 52 and 111   terawatt-hours of energy every year.

To put that in perspective, that’s   about the same amount of energy as the entire country of Belgium used in 2016.  And it gets worse as the  currencies get more popular.  When cryptocurrencies were first  coming onto the scene, there weren’t  that many new transactions being  added to the ledger and the currencies  weren’t worth all that much, so  the stakes weren’t super high.  That meant the computer power and  energy needed weren’t massive.  Most miners could probably do  it from their home computers.  But as this tech has become more  popular, miners have needed whole  warehouses of super-powerful  computers to outcompete other mining  rivals. And that energy consumption keeps on growing.  Cambridge researchers estimate that  at the time of the filming of this  episode, Bitcoin will use more than  120 terawatt-hours this year, more  than a 40 percent increase from last year. In 2020, The Central Bank of the   Netherlands estimated that a single bitcoin transaction produced around 402   kilograms of carbon emissions.

That equates to about two-thirds of the   monthly emissions of an average Dutch household.  This is, for clarity, not comparable  to the inefficiency of any other system  of moving money around. Then there’s the electronic   waste from all these processes. Because miners compete against   each other, they always need to upgrade so the physical hardware,   like computer chips, becomes outdated really quickly.  We’re talking obsolete in one or two  years, then it’s out with the old, in  with the new and more powerful.

That means a single Bitcoin   transaction makes around 355 grams of electronic waste, or a little more than two   iPhones or three-quarters of an iPad.  So… that all seems pretty bad.  Between the massive power demand  leading to carbon emissions and the  arms race of electronic waste, it  seems that there is a problem here  that desperately needs to be solved.  Luckily, just because blockchains  have been this way, that doesn’t mean  they have to be this way. You can change the way   blocks are added to the blockchain. The method we described earlier,   where lots of supercomputers around the world compete to be one of the ones   to solve the super hard problem, is called proof of work.  The literal fact that proof of work  requires so much energy is part of what  makes it secure.

You have to prove  that you did a lot of work in order to  add a transaction block to the chain.  If you didn’t have to do all that work,  anyone could add blocks to the chain  more easily, and lots of people  would do it, and hackers could mess things up. But there is another way to make adding   and verifying a block hard to do. Instead of proving that you did work,   you prove that you have some of the currency.

You put some skin in   the game… some collateral. You prove that you have a stake in the project. So   instead of proof of work, this is proof of stake.  Instead of a free for all competition,  proof of stake means miners have to  buy into a lottery for the chance to  be one of the users to create or check  a block of transactions Each miner puts up their own   amount of cryptocurrency and then only a few of the miners, instead of thousands,   are selected, at random, to solve the math problem.  And instead of competing against one  another, the block is only validated  once all the selected miners  have solved the math problem.  This means a miner can’t gain  an advantage by adding another  supercomputer to their setup.  The arms race will de-escalate.  Proof of stake should cut energy use,  the carbon emissions that go with  it, and cut down on e-waste since  those computers shouldn’t have to work  as hard.

Hardware that would be  entirely obsolete for proof of work, can  be used much longer for proof of stake. And this isn’t hypothetical.   Solana and Cardano are fairly large cryptocurrencies that use proof of stake.   They each have total market value of around $30 billion.  And one of the most popular  cryptocurrencies, Ethereum, has proposed  to make the switch to this method in  the second quarter of 2022. But this  is a complex technical challenge and  also a complex cultural challenge,  as many Etherium miners have invested  a lot of money in systems that  will no longer be as valuable.

But it  looks like it’s definitely going to  happen. Though, of course this  is software, and everyone knows  launches can be delayed. Experts are estimating that this shift   could cut Ethereum’s energy use by 99.95%.  Bitcoin, on the other hand, will likely  never change from proof of work and  so, as long as it exists and thrives,  will remain a massive consumer of  electricity.

Miners could attempt to use   more renewable energy, or only use energy that is produced during times when   there is excess energy. But, ultimately, that will be up to   individual miners and will be very difficult to track. Regardless, nearly all of the energy used   for Bitcoin could be being used for something else.  So while some cryptocurrencies are  already solving this problem, Bitcoin  will likely chug along consuming  huge amounts of power every time  someone makes a transaction.

Like we said up top, we know this   stuff is controversial and people have strong perspectives. Please   be respectful in the comments. No one knows where the future is taking us,   but we can all be fairly certain that cryptocurrencies aren’t going   anywhere anytime soon, and also we can agree that putting less carbon dioxide into   the atmosphere would be good.  I hope watching this was a good use of  your time, I certainly learned a lot  from this episode.

But you know  something that’s definitely worth your  time? Learning a new language. Babbel is a language learning app that   aims to get you speaking naturally in a flash.  Babbel teaches real world, practical  conversations in short, 10-minute  interactive lessons.

And it’s available  in 14 languages, from Danish to  Turkish. Their lessons are designed   by professional language teachers to help you start speaking a new language in just 3 weeks.  As a SciShow viewer, you’ll get up  65% off when you sign up using our  link. Plus Babbel comes with a 20  day money back guarantee, so you can  see where Babbel takes you on  our language learning journey.