Jim Verdonik founder of Innovate Capital Law
(this Article originally appeared in Triangle Business Journal on August 3, 2018
Many people associate technology with environmentalism. Developing the latest App is a lot cleaner than natural resource extraction – a/k/a mining and drilling.
Or is it? Or is our technology-based economy just extracting natural resources in different ways?
For many years, the dirty little secret of the digital world has been that it takes massive of energy to run our digital world.
Silicon Valley likes to project a clean and green image, but the server farms that keep our digital world running consume vast amounts of electricity to process d store information of dubious value. What’s the energy cost of millions of people looking a cute cat video?
The electricity needed to operate servers is just the first step. The servers also generate heat and more electricity is needed to air condition the server farms.
Silicon Valley has managed to hide its energy dependence for a long time, but blockchain and coin mining operations are blowing Silicon Valley’s cover.
Blockchain and coins and tokens utilize a worldwide network of computers organized into “nodes.” In an ordinary data network, data is stored on one server, but that opens the network to hacking. Blockchain networks protect data integrity by storing and processing the same data on thousands of computer nodes. Someone would have to hack thousands of nodes to change the data.
That solves Silicon Valley’s vulnerability to hacking, but the massive duplication is an electricity hog.
Of course, what is stored on the blocks of a blockchain isn’t necessarily raw data. The blocks usually contain hashes that represent the data. Hashes can turn very large amounts of data into much shorter strings of data. The common 256-character hash may represent millions bits of information.
The purpose of a hash isn’t to give you instant access to all the information. The purpose is to allow you to verify the information by comparing hashes. If all 256 characters of two hashes match perfectly, you know they represent exactly the same data.
The two biggest expenses of the people who operate the blockchain nodes are buying the computer hardware and paying the electric bills to operate them.
This has substantially increased the demand for certain types of computers and for cheap electricity. Generally, electricity generated by dams is the cheapest source of electricity. This has set off a gold rush of miners who are building large coin mining operations close to hydroelectric power sources. That makes the Pacific Northwest America’s coin mining capital.
Of course, increased demand for electric power competes with other industries and homes that also use electricity and the water that generates electric power. Droughts decrease electricity supply.
In some places, local towns have banned additional coin mining operations. There are running battles between locals, power companies and miners. Allegedly, miners have been making threats to power companies.
This reminds us of the range wars in old western movies where famers, cattlemen and sheepherders battled over access to water and grass lands.
Will we have similar range wars between coin miners and everyone else?
Will Greens begin protesting Big Tech the way they oppose Big Oil and Big Coal?
Stranger things have happened. Facebook used to be a popular company. Now, just about everyone is upset with Facebook about something. Who would have thought that so many people would unfriend poor Mark Zuckerberg?