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Why Does Bitcoin Use So Much Energy?

Why Does Bitcoin Use So Much Energy?

With the threat of climate change and environmental pollution, organizations worldwide are under pressure to reduce non-renewable energy consumption and carbon emissions. However, determining how much consumption is too much largely depends on our societal priorities—calculating what goods and services are worth spending these resources on boils down to our human values. 

In recent years cryptocurrencies, Bitcoin, in particular, have become one of the most captivating investments worldwide. However, Bitcoin mining energy consumption has become a major reason for concern. According to Cambridge Center for Alternative Finance data, Bitcoin’s current rate of energy consumption is about 94 Terawatt Hours per year. It is on par with the annual energy consumption of Finland, a country of 5.5 million people.

Source: Cambridge Bitcoin Electricity Consumption Index

But what exactly is Bitcoin mining, and why is it so energy intensive? Stay tuned as we discuss everything you need to know about Bitcoin mining energy consumption.

What is crypto mining?

When you trade Bitcoin, computers worldwide compete to finish a computation that creates a 64-digit hexadecimal number called a hash. The hash is then saved in a public ledger for everyone to confirm the validity of that particular transaction. A computer can get a reward of 6.2 Bitcoins on successfully solving the computation first. Apart from Bitcoin, other cryptocurrencies and NFTs use similar mining technologies contributing to high energy usage. 

Why does bitcoin need to be mined?

While mining brings new Bitcoins into circulation, it also serves an important role in confirming and validating new transactions on the blockchain. Bitcoin has no central authority like a bank to determine which transactions are valid and which are not. Thus, Bitcoin mining uses the proof-of-work algorithm to achieve a decentralized consensus. 

Bitcoin records being entirely digital, they risk getting copied, counterfeited, or double-spent. Mining removes all these risks by making it very expensive to hack the network. Furthermore, mining makes it more worthwhile to join the network as a miner than trying to compromise it. 

Does Bitcoin use a lot of electricity?

You must be wondering how some digital currency with no physical form can be so energy intensive. Since Satoshi Nakamoto minted the world’s first cryptocurrency in 2009, Bitcoin’s proof-of-work algorithm has enabled its trust-minimizing consensus. In the early days, you could simply run a mining program on your PC or laptop to mine Bitcoins. 

However, as the network grew and more people started mining, the algorithm became more difficult. At present, thousands of miners run machines 24/7 to verify transactions to the blockchain, consuming a huge amount of energy.


In addition, Bitcoin’s energy usage depends on how many miners operate on the network. All the miners compete to win the right to add the next block to the blockchain. But this structure causes a lot of energy waste as only one miner can add a block every 10 minutes. 

Furthermore, many miners are forced to upgrade their equipment and scale up due to this competitive nature. Some of the specialized mining machines give out a lot of heat and must be kept cool to maintain efficiency. While small operations can make do with fans, large mining facilities need industrial-style cooling systems, increasing energy consumption. 

How much electricity does a Bitcoin transaction use?

Digiconomist’s Bitcoin Energy Consumption Index states that a single Bitcoin transaction consumes 1373 kWh of energy. It is equivalent to the power consumption of an average US household over 47.07 days. With an average cost of 15.5 cents per kWh in the US, a Bitcoin transaction translates to an energy bill of about $213.

Source: Cambridge Bitcoin Electricity Consumption Index

According to the Bitcoin Energy Consumption Index, Bitcoin mining consumes about as much energy as the United Arab Emirates. Furthermore, at the annual rate of 127 terawatt-hours, crypto mining can easily be in the top 30 countries by energy consumption. Moreover, from December 2021 to June 2022, Bitcoin energy consumption peaked, consuming over 200 terawatt-hours. 

Why does blockchain consume So much power?

Blockchains like Bitcoin use the proof-of-work algorithm, making them such energy guzzlers. These blockchains operate on the condition that miners can only add blocks to the chain on a consistent time interval. Moreover, the time interval remains the same no matter how many miners are on the network. For Bitcoin, this interval is roughly 10 minutes, and on the Ethereum blockchain, it is roughly 15 seconds. 

So as more miners join the network, the proof-of-work puzzles need to be made harder. Therefore, while it may take the same amount of time to solve a puzzle, it would consume more energy. 

In August 2022, it was published estimates of the total global electricity usage for crypto-assets are between 120 and 240 billion kilowatt-hours per year, a range that exceeds the total annual electricity usage of many individual countries, such as Argentina or Australia

Can crypto mining be eco-friendly or carbon neutral?

Bitcoin miners have been under growing international pressure to switch to more sustainable and environmentally friendly resources. In fact, Bitcoin is growing less reliant on carbon every passing year, with China also banning coal-based mining in Inner Mongolia. Meanwhile, renewable options like solar energy are growing more efficient, therefore, more suitable for Bitcoin mining.

Moreover, initiatives like the Crypto Climate Accord are committed to further reducing Bitcoin’s carbon footprint. It aims to provide “an open-source toolbox of tech solutions” to help the crypto mining industry achieve net-zero emissions by 2030. 

In addition, Bitcoin mining is unlikely to increase at the same scale as a few years back. That is partly due to Bitcoin halving, which reduces the block reward for miners every four years. So unless Bitcoin’s price increases exponentially, miners would need more efficient equipment and cheaper energy to keep profiting from mining operations. 

Another way crypto mining can be made eco-friendly or carbon neutral is by switching to the proof-of-stake protocol. Ethereum, the second most popular and energy-consuming blockchain after Bitcoin, recently upgraded to the proof-of-stake protocol. Aimed at changing the amount of energy Ethereum miners consume, the change is estimated to reduce Ethereum’s energy consumption by 99.95%.

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