Bitcoin Network Consumes a Ton of Electricity But Its Not a Waste

The high energy consumption of the bitcoin network is directly associated with its mining consensus i.e Proof-of-Work (PoW).

A brief history of PoW and how it works?

PoW is the first consensus algorithm which was introduced by Satoshi Nakamoto (creator of Bitcoin) back in 2008, during the time when Bitcoin was created. This algorithm was mentioned in the Bitcoin white paper by Satoshi, however, this concept was introduced much earlier in 2004 by a computer scientist, Hal Finney.

There have been a lot of questions surrounding the PoW algorithm regarding how it actually works and how much energy it consumes. Well, the major purpose of PoW is to create new blocks and to confirm all the transactions. It contains the records of all the transactions that are related to Bitcoin, plus it is completely decentralised and promotes transparency. It is true that this consensus algorithm uses a lot of energy that means it involves a really high cost. Even though the mining machines have evolved a lot over the past several years and claim to be more energy efficient but it still consumes significant amounts of energy.

PoW mining consensus ensures equality as it offers an equal opportunity to any miner who wants to mine the next block, and once the block is mined, it distributes the block reward as per the energy input made by each miner in finding the next block. This is algorithm is quite different from the other popular mining consensus called Proof-Of-Stake (PoS), where the network selects the next miner for finding the block. This mining consensus might reduce the wastage of electricity but it is not as fool-proof as PoW.

Back in 2018, Vitalik Buterin, co-founder of Ethereum, the second-largest cryptocurrency, called PoW a tragedy. Buterin cited that PoW uses billions of dollars worth of electrical energy every year and still there are so many thefts and scams.

Bitcoin energy consumption and what it is equivalent to?

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Through several types of research, it was estimated that Bitcoin mining actually uses around 1% of the total energy consumption of the world. Bitcoin mining is a process through which new coins are generated and it is done by solving very complex computing equations with the help of some highly specialised computers. Along with adding new Bitcoins to the circulation, mining also ensures the security of the network. In order to make more money through the mining process, more and more miners have been added to the network which ultimately causes a higher energy consumption because all the miners will be working constantly.

The researchers at Cambridge University dived into the debate about Bitcoin energy consumption and did research on the same. In their research, they found out that the complete Bitcoin network across the world consumes more than 7 gigawatts of electricity and for a complete year, the total energy consumption is around 64 terawatt-hours.

They have compared this energy consumption with different countries and found out that the total energy consumption of the global Bitcoin network is more than the energy consumption of entire Switzerland over the same time period. This team of researchers have also created an online tool, Cambridge Bitcoin Electricity Consumption Index (CBECI) which is there to find out how much energy will the Bitcoin network actually require in order to maintain the network.

Bitcoin network actually uses renewable energy

Whenever the Bitcoin energy consumption debates come to light, there are numerous claims which say that Bitcoin emits a high amount of carbon dioxide. Some have even claimed that this emission is equal to what many big cities like Las Vegas have been emitting. So the question is whether Bitcoin is really an environmental disaster?

According to one researcher, Robert Sharratt, Bitcoin is not a hazard for the environment and he busted this myth that is generally propagated by most of the people. He has cleared the doubt of a lot of people regarding the energy consumption and the carbon footprint associated with cryptocurrency. He accepted the fact that Bitcoin or other cryptocurrency does use a lot of energy but it is not in any case equivalent to what a lot of people have been estimating. Sharratt also clarifies that crypto uses the world’s largest computer network hence the carbon footprint related to it is absolutely moderate. He further explained the benefits of using cryptocurrency and how it promotes wealth equality.

Another research by Coinshares in June last year revealed that although the energy consumption of the Bitcoin network is high, the carbon footprint dilemma is artificially created since the energy consumed by the bitcoin network is majorly clean and renewable energy.  CoinShares published a report stating that most of the energy consumed by Bitcoin comes from natural resources like Hydro, Wind and Solar power. It claims that 74.1% of the total energy consumed by Bitcoin is renewable which is very much similar to any other large-scale industry.

The most secure network

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Despite the fact that there is huge energy consumption in Bitcoin, a lot of people still prefer sticking to it. The reason is the security that this network provides. Over the past many years, it has been seen that the Bitcoin network is highly secure and the major reason for this security is blockchain. Bitcoin is backed by Blockchain and each transaction that takes place on this network is encrypted with blockchain which adds extra security to the network. Blockchain helps to keep all the personal information of the users completely safe and protects their privacy so that there will not be any chance of fraud or hacks. Hence, it is being said that Bitcoin is the most secure network than ever before.

Conclusion 

As we have discussed all the Bitcoin energy consumption and the usage of renewable energy, the end note is that Bitcoin has now emerged as one of the best digital currency. Even though it consumes a lot of energy, it is a proven fact through a lot of research that the majority of energy consumed by Bitcoin is renewable. Hence, it is quite clear that Bitcoin is not a hazard to the environment as it has been claimed by a lot of people.

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