In a world where we are all aware of our energy consumption and spend huge amounts of money on reducing CO2 emissions, how responsible is it to devalue the equivalent power consumption of a small country to maintain a blockchain? And how is this regulated at Gulden?
Does a blockchain always need the equivalent power consumption of a small country, or is one windmill enough?
A regular blockchain network doesn’t normally excel in energy efficiency. In fact, the widely used PoW (proof of work) protocol with which miners work is based on generating as much computing power as possible, and therefore has a high energy consumption! On the other hand, the actual CO2 emissions for e.g. the Euro or Dollar are also huge. The printing of the physical banknotes, the mining and minting of the metal coins, the bank branches that need to be lit and heated, the central computers that control the money flows, the hundreds of thousands of ATMs that are switched on day and night and need to be filled with cash, it all consumes energy!
So, aren’t we just embracing crypto to replace one energy-guzzling construction with another? Is blockchain perhaps a missed opportunity to take steps in this area?
Is there another way?
Yes! It’s now obvious that we are moving towards a world where money is going to be completely digital. The turnaround is underway and will be faster and faster. It is important that we (continue to) make sensible choices.
Gulden uses a second generation blockchain in which by cleverly combining the miners on the one hand and the witnessers on the other hand, a stable and secure network has been created which is much less dependent on just raw processing power.
A regular blockchain network needs raw computing power to secure the network against so-called 51% attacks. And by the law of physics (and market-economics), you can’t keep adding miningpower for ages. By applying the witness technology, Gulden is already safe at very low hashrates and therefore needs raw processing power to a much lesser extent. You can read more about this technique here.
Gulden however takes one more step.
By applying the SIGMA algorithm -which the Gulden miners use-, a lot less processing power is required. In addition, SIGMA does not require any expensive specialist equipment; a modern PC is all it takes. Because everyone with a desktop computer can mine Gulden, Gulden is also a lot more decentralized than regular networks with, for example, mining pools. If you have a roof full of solar panels, you could even mine CO2 neutral! More information about SIGMA can be found here.
In more concrete terms!
We can approach Gulden’s energy consumption in two ways. First, the network as a whole, so all miners added together. Secondly, and perhaps even more interestingly, the energy consumption per transaction:
Let’s start with how much energy the Gulden chain is currently consuming. On average, an efficiency of 42 Watt/Mh/s (see table above) is achieved. With a total hashrate of 2500Mh/s (as of April 2020), this means that the electrical power of all mining hardware together is 105kW. On an annual basis, Gulden therefore consumes 105kW * 8760 hours = 920MWh. This contrasts sharply with Bitcoin’s 73.12 TWh, which is a factor of more than 79000 times higher.
It is clear that the above calculation is not static. Miners are constantly being added – the network is growing – and so is energy consumption. However, Gulden remains by far the most ecologically responsible solution. In addition, the difference with first generation blockchains is in practice many times greater if you include the number of transactions that can be processed per block on the chain.
The yield of half a windmill is currently sufficient to run Gulden!
Energy Consumption per Transaction
Gulden can process many more transactions on the same hashrate than is currently the case. On average, about 3000 Gulden fit into one block. This puts Gulden with 576 minted blocks at a capacity of 1.728 million transactions per day – about 630 million a year -! That is the current limit and more than enough for now as will be shown below. Gulden, however, has been set up as a payment solution. Should more transactions per second be needed in the near future, this will of course be possible.
At the current Gulden price of 1 eurocent, 2500Mh/s is about the maximum hashrate at which one can still profitably mine (as of April 2020), unless you have very low electricity costs. At 42 Watt/Mh/s these 2500Mh/s consume about 920MWh on an annual basis. Currently only 400 transactions are processed per day and a transaction thus burns 6.3kWh.
Surprisingly, it becomes more interesting with more transactions. Because if we were to fill the blocks entirely with transactions, i.e. with the aforementioned 1.728 million, the same 2500Mh/s would yield an electricity consumption of only 0.00146kWh per transaction! Many times lower than the 6.3kWh we had just calculated. So the more Gulden is used, the lesser is the impact per transaction.
However, it should be noted that if the Gulden price would skyrocket, it would become more attractive for a miner to apply more PC power and thus energy consumption would increase accordingly.
The more people pay with Gulden, the more energy-efficient becomes a transaction and as calculated, it turns out that the energy consumption of an entire nation is by far not needed for a well-functioning blockchain.
Not only for the environmentally conscious consumer, but also for companies that want to do business in an environmentally conscious and responsible way, applying the Gulden blockchain is actually a ‘no-brainer’ in that respect.