ASHRAE Journal - July 2021 - 46

COLUMN DATA CENTERS
Cryptocurrency
Cryptocurrencies use decentralized finance, which
excludes middlemen in transaction operations required
in fiat currencies. No middlemen is the primary advantage
of decentralized finance.
In general, all approaches of cryptocurrency, both
traditional and each generation, can be summarized as
a question of consensus. Proof of work-PoW (or mining)-can
be viewed as a first-generation cryptocurrency.
The intent of distributed ledger systems and cryptocurrencies
is fundamentally to move the consensus from
human-controlled to something transparent and inherently
secure.
Several general types of consensuses exist. Because it
was first-generation, PoW (Bitcoin) has become the most
popular in the eyes of the news media and, hence, the
largest focus on the data center energy use stage. It's also
known to be the most inefficient means of consensus for
cryptocurrencies.
Other cryptocurrencies are being added into the mix
and use various mining techniques, offering different
degrees of security and efficiency (in terms of both work
product and energy consumption).
Cryptocurrency is rapidly going through an evolution
that will continue for the next decade or more. Mining
crypto currently accounts for 90% of energy consumption
of all energy spent on first-generation crypto. This
may be affected by constantly increasing power consumption
per each Bitcoin minted to the point where
mining is no longer profitable, which will force a faster
transition from PoW to the proof of stake (PoS) consensus
(second-generation) or other newer algorithms.
The evolution of crypto is also influenced by other factors
outside energy consumption and energy efficiency,
including gaining government and public acceptance
and popularity, limited vs. unlimited supply options and
market saturation.
Digital Currency/Data Center Connection
Digital currencies require forms of data storage, data
transmission and data processing. Fiat currencies
are stored in many locations. For example, your bank
account information is stored within a database in your
bank as well as within another platform on your personal
computer or in the cloud. Still, other portions of
this information are stored in other locations like credit
bureaus, tax accountant files and the IRS to name a few.
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A S H R A E J O U R N A L ash r a e . o r g
J U LY 2 0 2 1
TABLE 1 Conceptual comparison of energy required for the storage, transmission
and processing of digital currencies as a function of ideal useful work.
DIGITAL CURRENCY
Fiat (Traditional)
Crypto PoW
Crypto PoS
Ideal Scenario
STORAGE
3 Times
2 Times
1.2 Times
1 Times
TRANSMISSION
2 Times
1.5 Times
1.2 Times
1 Times
PROCESSING
4 Times
2 Times
1.5 Times
1 Times
The transmission of that information often has to bridge
several middlemen for basic transactions like ATM withdrawals,
taking out a loan and/or an online purchase
using a credit card and the associated bank withdrawal.
Each of the previous transactions requires data processing
(authentication of the user to the account, authentication
of credit card use, currency exchange fees,
processing fees and many data approvals among various
middlemen in each process).
Digital currencies in contrast rely on a single distributed
database/ledger of the same information,
everywhere. Crypto is also a direct client-host currency
exchange with no middlemen. As a result, we can speculate
that the relative energy cost to perform the same
work looks something like Table 1 for each form of digital
currency.
The PoW algorithm used by Bitcoin uses more electrical
energy and computing power than secondand
third-generation crypto. However, the burden
of mining is entirely on private entities who must
constantly look for cheap energy resources to stay
competitive.
For example, China contributes 70% to 75% of the mining
power for Bitcoin,6 and the mining operations there
are located in a small number of geographical areas that
are optimized for this purpose-cheapest electricity, low
cost of living and temperate climates. Sichuan is an area
ranked second in hashpower (power used for algorithms
in the crypto mining process) and also happens to be
where a large concentration of hydroelectric power was
built to a capacity far beyond the actual demand, in
which case the energy produced would only be wasted if
it were not now being consumed by the mining operations.
In the United States where oil and gas operations
frequently need to " flare off " excess natural gas that is
produced as part of their normal business, they are now
bringing in mobile data centers filled with ASIC mining
equipment to generate cryptocurrency from what
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