One of the constant criticisms of Bitcoin, and many similar cryptocurrencies, is the environmental impact. But what is the issue with Bitcoin energy consumption?
In this article, I’ll take you through some of the most significant concerns and criticisms about how Bitcoin operates.
Bitcoin Mining Energy Consumption
Criticism centres on the way BTC are created, through mining. This is a topic of discussion because of the mining process’s high energy consumption and the environmental damage producing that energy causes.
The Bitcoin network comprises thousands of nodes working on calculating complex mathematical problems to verify transactions and add blocks to the chain. Each of these nodes is a computer, usually with energy hungry mining ability, and they all need electricity to run.
How Much Energy Does Bitcoin Consume?
Back in 2017, Bitcoin energy consumption was around 6.6 terawatt-hours. This level attracted criticism.
Earlier this year, it was averaging 139 terawatt-hours. Not only is this a massive increase in just five years, but it is also now equivalent to the annual electricity consumption of the nation of Argentina. Or Norway. Or Sweden. Or Malaysia.
Cambridge University has a live feed of Bitcoin energy use.
Analysts suggest this level of energy consumption is pumping 65 megatons of carbon dioxide into the atmosphere every year.
And this is during what most people agree is a climate crisis.
Why Does Bitcoin Need So Much Energy?
As briefly explained above, ‘miners’ use computers to solve the complex maths problems required to verify transactions and develop the Bitcoin blockchain. This requires energy consumption.
They do it because the reward is payment in BTC.
As Bitcoin has grown in popularity, the problems miners solve have become more complex, and earning rewards is more challenging. This has led to miners seeking out new hardware to compete.
Generally, this powerful equipment is energy intensive and is run 24 hours a day, seven days a week.
Inevitably, this has increased the power consumed.
As most of the planet’s electricity production is dependent on fossil fuel, this increasing demand from cryptocurrency puts strain on limited resources and contributes to pollution.
There has been a backlash. Bitcoin has been criticised, environmentalists have attacked crypto, and ‘green’ alternatives have found popularity in the market. Some countries have even cited environmental damage as a reason for banning Bitcoin mining. Well, China has. And how much of that was truly about fears for the planet’s future is open to debate.
Can We Control Bitcoin Energy Consumption?
Unhelpfully, the answer is ‘sort of’.
Governments have attempted to tackle Bitcoin mining – see the China reference above – and proposed regulations, including in the European Union, suggest making climate goals part of the consideration.
Restriction, though, may not be the best approach. Cryptocurrency is the future of finance, and Bitcoin is the biggest and best-known asset in the industry. Demand will grow and the pursuit of profit will continue, even if that means relocating to avoid restrictive eco regulations.
International agreement on almost anything is essentially unheard of. So, if one country, or a group of nations, cracks down on mining, all that does is create opportunities for miners located in less regulated territories.
The answer may actually come from within the industry itself. The majority of people involved in crypto don’t want to contribute to climate catastrophe. They are devoted to crypto precisely because it challenges the old ways and uses tech to find better, more efficient solutions.
This attitude has been turned towards the energy consumption issue. Miners themselves have looked at how tech solutions can create the clean, cheap, and abundant energy supply they need without damaging the environment.
We are already witnessing exchanges and mining companies shifting operations to ‘greener’ energy sources, such as wind, solar, and even nuclear.
This willingness to find a solution and encouragement from governments for miners and crypto firms to be more aware of energy consumption concerns, could lead us to a solution.
PoW vs PoS
Critics claim that Bitcoin’s energy consumption issue results from using Proof of Work (PoW). This process was never intended to support what has become a multi-billion-dollar asset.
In fact, competing cryptocurrencies have used this argument to push their own algorithms as superior (even if attacking Bitcoin’s lack of green credentials is more a useful way to hit out at the ‘king of crypto’ than a genuinely held concern).
Ethereum, the number two crypto to BTC, is about to switch from the energy hungry PoW model to Proof of Stake (PoS), which is pushed as less power intensive.
Favourable reports suggest that the energy consumption by the Ethereum network could fall by 99% as a result. Many more blockchains are already using PoS, such as Cardano and Solana.
So, there are less energy intensive alternatives out there and available, which means blockchain tech and cryptocurrency could continue to grow without destroying the planet.
It must be noted, however, that despite Bitcoin’s well-known green issues and continued use of PoW, it remains the most valuable, best-known, and most wanted cryptocurrency.
Conclusion
There is no hiding the fact that Bitcoin’s power needs are enormous and growing. There’s no avoiding the conclusion that Bitcoin and similar mined currencies are bad for the environment.
But it’s not all doom and gloom. Innovative solutions are progressing, with the crypto industry taking the lead in many areas.
Sourcing cleaner energy and finding algorithms that reduce demand, like PoS, will be part of the solution.
But, in the meantime, BTC’s popularity grows, and so does its energy consumption.
