3.1

High energy consumption

With more and more equipment participating in mining and more substantial computing power, the energy consumption of Bitcoin and Ethereum is increasing every year, and the power consumption is also skyrocketing, resulting in massive energy consumption. Moreover, the mining solution process has no value other than proving who should be rewarded. Therefore, mining is considered a severe waste of resources. The electricity consumption of the Bitcoin network in 2019 has already exceeded the electricity consumption of the entire country of Belgium⁶. Figure 1 reveals the trend of bitcoin electricity consumption since 2012. The data comes from CBECI⁷.

Figure 1.

Bitcoin’s annual electricity consumption from 2012 to 2021.

3.2

Electronic waste

In order to get more payouts, miners are constantly upgrading their mining equipment. Table 1 shows several stages of mining equipment. At first, people used ordinary computers and GPU graphics cards to mine but later upgraded to mining machines designed specifically for mining.

Table 1.

Mining machine classification.

For CPU and graphics card mining machines, even if they are not used for mining, they can be used as ordinary computers. For FPGA mining machines and ASIC mining machines, if they are not used for mining, they can only be scrapped.

E-waste refers to abandoned mining machines. The life cycle of mining machines is generally two to three years. Although they can continue to work after two to three years, the possibility of mining “mines” becomes very small. With the system cranking up the mining difficulty factor, the electricity costs will not offset the mining output if miners continue to use older equipment. As a result, these mining devices designed explicitly for pow will be spontaneously phased out and become electronic waste. The e-waste generated by the cryptocurrency mining industry has become a significant issue. The literature⁸ states that Bitcoin generates 30.7 kilotons of e-waste annually, equivalent to the amount of telecommunications equipment waste produced by countries such as the Netherlands.

3.3

Carbon footprint

In December 2018, the World Health Organization and the International Energy Agency jointly announced that after comparing the data of 135 countries, the 20 countries with the highest and lowest per capita carbon emissions were obtained. At the same time, it also announced that global warming caused by human-caused climate change is real. Research shows that backward countries’ per capita carbon emissions are extremely low due to the lack of industrial facilities and even the inability to guarantee power supply. The higher the income of countries, the higher the per capita carbon emissions. For example, the highest per capita carbon emission in Qatar is about 600 times that of the Democratic Republic of Congo, reaching a terrible level of 35.73 tons of carbon dioxide per person per year.

Since mining requires much electricity, colossal greenhouse gas emissions follow when high-carbon power generation methods such as coal and petrochemicals are still the primary electricity source for human society. Worse, prominent blockchain miners are primarily distributed in underdeveloped areas, exacerbating the final carbon emissions. Research shows that Ethereum’s carbon emissions are equivalent to Hong Kong’s⁷.

3.4

Expensive transaction fees

Equation (4) describes that a miner’s mining revenue consists of rewards and transaction fees.

The reward that can be obtained from Bitcoin mining is halved every four years, which is an exponential decrease. Therefore, if miners want to maintain the same income, they can only rely on the transaction fee attached to each transaction, which means the burden on the transaction initiator will increase. Ethereum, which also uses PoW as a consensus protocol, faces the same dilemma. We have observed that the minting and exchanging fees for Ethereum-based NFTs are generally tens to hundreds of dollars. The minting fee for “CloneX #10673” is $19.2, and the minting fee for “Hooligan #1951” is $31.11.

3.5

Centralization

Those who have the technology and are rich can obtain and develop more sophisticated mining equipment, which is equivalent to monopoly computing power, which runs counter to the decentralization of Blockchain. At the same time, because of selfish mining pools, blockchain centralization is becoming more serious. The Hash distribution shows that the largest 11 mining pools account for almost 100% of the Bitcoin network’s computing power (the portion marked as unknown is the remaining share). In descending order, Bitcoin’s share of computing power is Foundry USA, AntPool, F2Pool, Poolin, ViaBTC, Binance Pool, SlushPool, BTC.com, Luxor, SBI Crypto, unknown, and KuCoinPool.

4.1

Analysis of PoS advantages

PoS (Proof of Stake) is a system that distributes interest according to the amount and time of coins held by miners. In the PoS model, the miners’ “mining” income is proportional to the coinage; that is, the miner with a higher coin age becomes the leader, while the miner with a higher coin age becomes the leader. The computing performance of the device is irrelevant.

Taking 140,000 mining participants as an example, if PoS is chosen instead of PoW, the energy consumption can be reduced by 99%. Due to the introduction of the “coin age” in PoS consensus, the mining difficulty is significantly reduced, so ordinary computers can be competent for mining, and one PC can run multiple mining clients simultaneously, significantly reducing energy consumption. The “retired” mining machine computer can be used for daily office use, thereby reducing the possibility of electronic waste generation, which is different from the “non-mining or scrapping” situation of the PoW mining machine. At the same time, the PoS consensus also retains the high openness of the public chain.

4.2

Analysis of DPoS advantages

DPoS (Delegated Proof of Stake) is a consensus algorithm based on voting. The token holder elects several representative nodes to operate the network, and professionally run network servers are used to ensure the security and performance of the blockchain network. In the DPoS mechanism, there is no need for computing power to solve mathematical problems, but the coin holder elects the producer. If the producer is incompetent, he may be voted out at any time, which also solves the performance problem of PoS¹¹.

In the experiment comparing PoW and DPoS, we determine that since DPoS adopts the rotating mining mechanism, the orphan block problem in the PoW consensus is effectively avoided. When DPoS consensus is executed on an ordinary personal desktop computer, the block generation speed can reach 3 seconds per block or even 1 second per block, significantly improving the system’s throughput and reducing transaction latency.

In conclusion, both PoS and DPoS will be suitable alternatives to PoW consensus from multiple dimensions such as social responsibility, transaction fees, and performance metrics.