Bitcoin & Energy
Everyone knows Bitcoin is a core for crypto and no one can imagine the development of crypto & blockchain without it. Find in this article why its mining consumes so much energy and how to fix it.
Even though Bitcoin is a pinnacle of the crypto revolution, many black spots really matter to the global community today, one such is the consumption of energy for mining BTC.
BTC which is currently the leader with $912 billion in market capitalization requires a huge amount of electricity for mining operations.
Bitcoin was launched as a decentralized digital currency, without a central authority or single administrator in 2009. It is a completely transparent financial network, as it runs on an open-source blockchain, with every transaction being recorded on a public and decentralized open ledger for all participants to see and verify.
To verify each transaction enormous amounts of electricity are used. As per a research firm, Statista estimates that every year BTC mining operations require 130 terawatt per year, which is far more than the energy usage of many countries.
Experts believe that if Bitcoin were a country, it would rank in the top 30 worldwide for energy use. The amount of power BTC uses could provide electricity to millions of people, with an environmental burden of an estimated over 34 megatons of carbon emissions.
The average energy consumption for one single Bitcoin transaction in 2021 is equal to 100,000 VISA card transactions. One BTC transaction requires 1723 kWh per hour, whereas 100,000 VISA transaction requires only 149 kWh per hour.
According to recent estimates from the University of Cambridge, BTC now uses up more electricity a year than the whole of Argentina.
In June 2021, Bitcoin's annualized footprint in electricity consumption reached an all-time high and was believed to be higher than the power consumption of Finland.
Understanding the environmental concerns, Tesla car company which was accepting BTC for car booking announced in May 2021 that it is no longer accepting BTC as payment on account of its poor green credentials.
To know more about how BTC mining works, kindly read our article Bitcoin Mining Explained published recently.
Shifting to green energy
To tackle this issue, many miners have now started using renewable power to mine BTC. Currently, an estimated 39% of proof-of-work mining is performed using renewable energy. So perhaps the most obvious path to a green future for Bitcoin is simply upping that figure.
Many new companies have entered the market to solve the power consumption problems and many have revealed environmentally friendly ways to mine BTC.
Some miners have announced plans to use solar power, hydropower, and some planning to use methane gas for BTC mining.
Moving from PoW to PoS
Ethererum, second after Bitcoin in market capitalization with over $400 billion, has already decided to move from a proof of work (PoW) to a proof of stake (PoS) system. This move will save lots of energy that are today required by miners to verify transactions on blockchain systems.
By using PoS, BTC will remove the competitive computational element of proof of work, it saves energy and allows each machine in a PoS to work on one problem at a time, as opposed to a PoW system, in which an array of machines are rushing to solve the same problem, thereby consuming more power.
However, with the current framework, it seems difficult for BTC to move towards it.
Why does Bitcoin need so much energy?
When Bitcoin was launched, it did not require much power, as there were fewer people on the blockchain.
When more and more people joined the mining operations and started competing for BTC rewards, the small mathematical problem became more complicated and required more power to be solved.
The difficulty level of mining each Bitcoin went on increasing and with the limited amount of BTC to be mined in the future, the level of difficulty is going to be very high, as compared with today.
Of all the 21 million BTC that exist today, nearly 90 percent was already mined in mid-2021. The closer BTC gets to its supply limits, the computing power required for mining goes up incrementally.
Mining BTC in 2014 when there was less in circulation was easier and less energy consumed than what is required in 2021.
With the last BTC expected to be mined in 2140, it is high time for miners to opt for renewable energy. Maybe this shifts the government's mind on BTC and looks at it as an asset to the nation, as well as protecting the environment.