The Bitcoin network uses proof-of-work (PoW), in which computers in the network burn their computing power to secure the network. PoW leads to many fundamental issues including, but not limited to:

1. Massive energy consumption

Bitcoin mining consumes more energy than the Czech Republic and almost as much as Chile, a process that burns through more energy than 153 of all the countries on earth.

A single Bitcoin transaction consumes enough energy to power the average U.S. home for over 34 days, making it over 550,000 times less efficient than a single Visa payment.

2. Misaligned incentives

Miners are economically incentivized to keep the network as slow and expensive as possible, while holders of the currency and developers want the network to be as fast, as cheap, and as scalable as possible.

Proof-of-work miners are not required to be actual stakeholders in the coins they mine–they are not required to actually hold any balance of the coin itself. Miners often sell the coins they mine immediately for cash and can quickly switch from one network to another if another cryptocurrency is more profitable to mine. The miners ultimately control the network and aren’t required to have “skin in the game”.

3. Huge carbon emissions

A single Bitcoin transaction emits about as much carbon as a single passenger vehicle does over the course a 1,150 mile drive.

4. Centralized control

Bitmain, the largest mining company based out of China, controls 42% of the entire Bitcoin network, either directly or indirectly, through their ownership of BTC.com and Antpool, two of the largest mining pools.

Factoring in other Chinese mining pools, the Chinese government could wipe out over 50% of Bitcoin’s computing power if it wanted to.

5. High barriers to entry

Becoming a miner in proof-of-work requires significant capital expenditures on specialized hardware, warehouse facilities, electricity bills, technicians, etc. These high upfront costs edge out potential competing miners and leads to centralized network control by large mining companies.

6. ASIC (Application Specific Integrated Circuit) susceptibility

Engineers can develop proprietary processors specifically optimized to solve the proof-of-work algorithm, leaving others with a much lower chance of winning mining rewards, further compounding the problem of centralized network control and distribution of network inflation.

7. Resource hoarding

Proof-of-work miners aggressively buy up the latest GPUs, FPGAs, ASICs, and other critical pieces of hardware, pushing up prices and limiting access to extremely valuable computing resources that would otherwise be used by researchers, developers, gamers, graphic designers, computer scientists, and other consumers.

8. Centralized inflation

All new minted coins in proof-of-work flow to third-party miners, and not to the stakeholders (the true proponents) of the currency itself. This is similar to how newly-minted US dollars do not flow directly to the existing holders of the currency, which leads to dilution of value.

Fortunately, the solution to these problems is proof-of-stake. Unfortunately, the economic incentives for large mining companies and other titans of industry to maintain the proof-of-work status quo are simply too great. We believe that a grass-roots, community-led movement to use, develop, and adopt sustainable alternatives will provide the only long-term, viable solution to the current problems.

BitGreen (BITG) uses proof-of-stake, which secures the network using intuitive economic incentives, instead of wastefully burning through massive amounts of computing power. BitGreen can be mined on just about any computer and consumes no more energy than a regular desktop application. Holders of the cryptocurrency essentially post collateral in the form of BitGreen, proving to the network they are stake holders and thus are economically incentivized to follow the rules of the network. Network inflation, i.e. freshly minted BITG, flows directly to the holders of the coin. This aligns economics incentives of network participants by essentially creating a single interest group. There is no longer a distinction between miners and currency holders, as with Bitcoin and other proof-of-work currencies. The fact that anyone using almost any computer can become a miner (or “staker”) in the network democratizes the mining process by removing barriers to entry and ensuring new coins are widely distributed. This also leads to natural governance mechanisms, by which stake holders of the cryptocurrency can vote for proposals directly on the blockchain in a transparent fashion, with votes proportional to their stake in the network.