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How Much Energy Does Bitcoin Actually Consume?

Michelle Heath

Bitcoin Series:

The Brilliance |  The Dilemma | Tax Havens

How Much Energy Does Bitcoin Actually Consume?

Bitcoin is currently the most widely traded and successful cryptocurrency on the market. But why does Bitcoin consume as much energy as it does and have an extensive carbon footprint?

Bitcoin uses a lot of energy.

1 Bitcoin transaction 455,000 VISA transactions

Bitcoin’s validation and proof-of-work algorithm generates a continuous energy-intensive block mining cycle, currently estimated at an annual consumption requirement of 77.8 TWh (equivalent to 46 million barrels of oil). 

The hashrate is the combined computational power needed to validate the Bitcoin transactions.

Where is Bitcoin mined?

In 2020, around 98% of Bitcoin mining occurred in 19 countries, the majority of which was in China (72%).

In a recent benchmarking study (Hilemand and Rauch) suggested the Bitcoin network had a weighted average carbon intensity of 475 grams of CO2 equivalent (gCO2eq) per kilowatt hour (KWh) consumed.

The revenues from bitcoin mining continue to grow as the value of the Bitcoin goes up. The opportunity for an ongoing stream of revenue encourages miners to acquire stronger, more powerful dedicated energy-consuming hardware to increase their opportunity of beating the other miners to mining rewards resulting in growing electricity demand and the related environmental impacts.

Definitions:

Proof-of-work – a form of cryptographic zero-knowledge proof whereby one party proves to others that a certain amount of computational effort has been expended for some purpose (Wikipedia)

Abbreviations:

TWh – terawatt-hour

kWh – kilowatt-hour

Sources:

https://bitcoin.org/bitcoin.pdf

https://en.wikipedia.org/wiki/History_of_bitcoin

https://www.investopedia.com/terms/b/blockchain.asp

https://www.statista.com/statistics/1200477/bitcoin-mining-by-country/

https://www.investopedia.com/terms/a/asic.asp

https://www.investopedia.com/terms/b/bitcoin-mining.asp

https://blog.goodaudience.com/blockchain-for-beginners-what-is-blockchain-519db8c6677a

https://www.blockchain.com/charts/hash-rate

https://data.bitcoinity.org/bitcoin/hashrate/all?c=m&g=15&t=a