Q&A: Explaining Cryptocurrency and Blockchain
Expert Bina Ramamurthy discusses the pros, cons and future of alt-currency in New York and beyond
Dr. Bina Ramamurthy is director of the Blockchain ThinkLab at the University at Buffalo. She is also a crypto miner herself. This puts it at the forefront of the industry, which poses a challenge to traditional currency and has raised environmental concerns due to its energy demand.
Blockchain and cryptocurrency are mysteries to many people, so to understand the interview, let’s define what we are talking about.
blockchain, introduced in 2011, involves computers and servers programmed to solve complex mathematical problems on a continuous virtual register. This work is handled by so-called “crypto-miners,” who earn cryptocurrency – most often Bitcoin – when a problem is solved. They can then exchange it for another currency or retain ownership.
Cryptocurrency is an alternative and decentralized form of currency. Bitcoin is the most popular form of this digital currency; one coin is currently worth $31,666.70. Cryptocurrency can be used to pay for goods and services; It does not exist in physical form, like a coin or dollar bill, but rather virtually in data form.
Outside buyers can get in on the action without a mining operation, buying all or part of a bitcoin through cash transactions or exchange transactions.
The appeal of cryptocurrency is its decentralized nature; it knows no national borders. It circumvents banking and government policies and practices. Critics argue that the extensive use of power-hungry computers is bad for the environment and that its unregulated nature opens the door to use by criminals.
The state legislature is considering a two-year moratorium on new mining operations seeking to move into the state using fossil fuel power. It would also limit the expansion of current operations by doing the same.
Investigative Post reporter Layne Dowdall interviewed Ramamurthy the week of May Day.
Dowdall: Describe a crypto-mining operation to me.
Ramamurthy: Racks and racks and racks of high-powered computers and servers. They calculate the numbers to solve the puzzle. It is very difficult to solve, but very easy to prove. And solving that puzzle in order to write something in the ledger takes a lot of energy and that’s why they call it mining. They don’t dig into the ground, but they make coins in the process. If you keep trying, at some point you solve the puzzle and you are rewarded.
So there’s mining in Finger Lakes, there’s mining in China, there’s mining in Iceland, there’s mining in Pittsburgh, there’s mining in Tennessee, there’s mining in Austin. They all compete to solve the puzzle. If they solve the puzzle they can write the block to the blockchain, the reward for this is cryptocoin.
The more power you have, the higher the probability that you will solve the puzzle before the others. So, for example, if you have to solve the puzzle by yourself, it will take 10 days. If you employ 10,000 people, you might solve it in an hour.
Right now this crypto coin reward is worth around $30,000 which I would say is a pretty good incentive of mine. Who are the people behind the mining, and are there many of them here in Western New York?
There are many miners with large mining rigs – server racks – and there are individuals who run small mining operations. Sometimes individuals come together to form a pool of servers to improve their chances of mining a block and getting rewarded. In this case, the reward is shared among the pool participants.
One of the largest crypto operations in the United States is located in Rochester, Foundry LLC. Not only do they do crypto mining, but they also focus on research and development around cryptocurrencies and blockchain. Full disclosure, Foundry donated to UB Blockchain ThinkLab research.
I have heard of cryptocurrencies being used by those involved in criminal activity.
There are crimes in the crypto world, just like in, you know, the frontier lands. But that’s not the only thing. There are people who take advantage of it, deliberately or by mistake, accidentally. It’s like any other industry. It’s like the old west, it’s the beginning of time. Everyone is trying to find a way. And people who commit crimes are also looking for opportunities. The way I look at it, people notice [the crime] because it’s a lot louder than the real thing happening.
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Why do you think there is this opposition to mining operations like what we see from community members in North Tonawanda and Niagara Falls?
This consensus process and solving this puzzle in order to write something in the ledger consumes a lot of energy. To operate batteries and batteries and batteries of machines, you need energy. You also need to cool the heated racks that run 24/7 to solve the puzzle.
If you’re spending more money on energy than on rewards, that’s debatable, isn’t it? You need to balance the amount you invest with the reward you get. This is why operations are migrating to places where there is cheap or free energy, which may mean using non-renewable energy sources. We have hydroelectricity in New York. In Pennsylvania, they use all mud coal, which is very, very bad. And in Texas they’re using all the remaining sites of all these oil wells to run the rigs.
It’s like having a factory next to your residence. Would you like noise and pollution and all that? Residents don’t want their premises disturbed by all this. I think all of this could be taken care of by zoning and other regulations.
New legislation is being considered in New York that would prevent new mining operations from moving into old power plants that use fossil fuels as their main source of energy. It would also halt any expansion of current mining facilities. What is your point of view ?
You don’t want to get in the way of innovation, we want to be on the cutting edge of technology. At the same time, we also want to be cautious about climate change and other related effects. These are things that can be written down through policies and regulations. If the legislators do this, the industry will follow this and create responsible innovation.
It’s happened to other industries. Look at the soda industry, there’s a five-cent can surcharge. Planes and cars are heading towards net zero emissions. And then look at the plastic bags turned into paper bags. These are things we did responsibly. This does not mean that we are going to ban the automobile because it consumes a lot of gas. You make it better, you make it effective. So this is where we are in blockchain and cryptocurrency. Everyone, in their own interest, tries to improve it.