Bitcoin was the world’s first crypto. That means, basically by definition, it won’t be the most advanced. It’s like comparing the Wright Brother’s original experimental airplane to a modern jumbo jet. The more the tech gets used, the more people will try to refine it until they get something better.
When it comes to Bitcoin, there is one thing holding it back from reaching its full potential as a cutting-edge store of value asset: its “proof of work” validation system. The concept was brilliant. By using decentralized computing power and difficult math problems, the blockchain could force validators to compete against each other, none of them would ever get too powerful, and the system could keep updating its transaction records without the need for a central authority.
The fact that the Blockchain tech has held up during Bitcoin’s rise from novelty digital pocket change to the most successful asset in history in terms of value over time, with a market cap of hundreds of billions, is proof of just how well built the system is.
But see, the problem is, there are things about Bitcoin that really only made sense when it was still in the pocket change phase. The big one is the system is an insane gas guzzler.
People Hate “Coalcoin”
The basic premise of Bitcoin mining is that, as more miners use more computing power to validate Bitcoin and generate new coins as their reward, the harder the process gets, and the less the energy and computing power is worth.
You used to be able to mine Bitcoin on your home computer back when it was new, and if you did it back then and held onto the coins, you’re probably rich now.
Now you need an entire warehouse full of specialized computers to make any money at all off of it. Those specialized computers suck up so much energy that it’s become a running joke to report on what country’s total power usage the Bitcoin network has most recently surpassed.
As far back as early 2021, Statista placed it using more energy than Norway, Bangladesh, or Switzerland.
And all that energy is being put towards solving math problems that the blockchain is serving up just to make itself harder to control. The answers have no value as information. The blockchain makes these questions up and asks them to the mining computers purely for validation purposes.
After the blockchain is satisfied that the mining computers are working hard enough to maintain the competition between validators, and to keep the network secure, the number is thrown away.
In a world where people are getting more and more worried about the effects of fossil-fuel-driven climate change, and are wondering where else we could get enough energy to run our modern society, using that much energy solving math problems that don’t really mean anything purely to measure how much miners are willing to invest in getting their share of Bitcoin is just not going to fly.
As far as a lot of people are concerned, Bitcoin might as well be “coalcoin”
People aren’t going to stand for it, and the longer it goes on, the more that non-users are going to start seeing Bitcoin as less an opportunity to take advantage of and more a problem to be destroyed.
More recent cryptos like Cardano have done away with this model of validation entirely, using “proof of stake” instead, where users are given permission to validate the blockchain and earn rewards by freezing their tokens. Even Ethereum recently modified itself to work this way.
But that’s not the only alternative to the huge energy drain. There’s another idea, “proof of useful work”, in which the made-up math problems that sustain the blockchain are replaced with real ones that someone actually needs solved.
Mining For Answers
The basic premise behind “proof of useful work” is simple enough. In order to validate transactions, the Bitcoin blockchain needs to force validators to invest massive amounts of time and energy. The idea is to make it too hard for any one validator to control 51% of the total validating power, which would allow them to start tempering with the transaction records.
That means that the questions the mining computers are being asked need to be difficult. They need to force miners to use more and more hardware (running on more and more energy) to keep up with their competitors because if keeping up is all they can do, they will never get far ahead enough to steal.
Under the current system, those questions are just made up by the blockchain, but they don’t have to be. They could be any math problem that anybody anywhere on earth is trying to solve.
The calculations involved in rocket launch trajectories, measuring and forecasting the weather, or simulating how extremely complex molecules will react could all be fair game for a crypto consensus mechanism based on this concept.
This wouldn’t reduce the amount of energy used to sustain the blockchain. It would reduce the amount of energy used by anybody who needed those problems solved since they no longer have to solve them themselves. Either way, it’s theoretically the same amount of energy saved.
You don’t need a warehouse full of computers to calculate that it’s a good deal.
This good deal might be taking its first steps towards becoming a reality, thanks to the team behind FLUX. Now, I’m not recommending you buy FLUX at this time, but I have traded them in one of my model portfolios before for over 100% profits.
Now, they’re running a “proof of useful work” test project in collaboration with a university in Switzerland on something they call “Academic OnFlux”, which they hope will pioneer the technology necessary for distributing computer workloads through a decentralized network.
From there, they’re hoping to refine the technology to the point where a fully developed Proof-of-useful-work consensus mechanism is possible.
They may not be the last team to create one either.
If Bitcoin doesn’t want to be left behind or lose all public goodwill, it should be paying close attention to the results.