Cryptocurrencies like Bitcoin require new coins to be mined by computers solving equations, a process called ‘mining’. This process was designed to reward miners with bitcoins approximately every 10 minutes. To maintain this design; as more computers work to solve the equations, the sums become harder to solve. This has led miners to apply even more processing power, ultimately creating an ever-growing demand for energy.
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Calculating the Energy Used
One way to look at energy usage is to calculate how many of these sums are conducted every second. Then find out how much electricity it takes to do each sum.
There are so many of these individual sums or hashes. You have to consider them in millions of hashes (mega hashes) or billions of hashes (gigahashes). According to Blockchain, computers on the blockchain network hit 119 quintillion hashes per second on January 1st, 2020.
There are many different mining computers to choose from. Many companies focus on Application-Specific Integrated Circuit (ASIC) computers which use less energy.
Mining companies claim that when mining for bitcoins, they use one watt of power for every gigahash per second.
Mining Stigma
Bitcoin has carried the stigma of being an energy-consuming monster for quite some time. Research by the American Chemical Society assessing the environmental impact of Bitcoin suggests that in 2018, Bitcoins total output used 31.3 TWh of electricity and produced 17.3 megatons of CO2.
Of this, approximately 99% of the impact came from the mining equipment. One of the most significant factors influencing this was the location of the miners. For example, countries that use mostly fossil fuels had a much bigger impact than countries that utilise greener energies.
The results also concluded that environmental impact would decrease if the equipment becomes more efficient or if miners relocate to colder climates, where less energy is needed to cool the computers. To ensure that the profit made from the reward outweighs the cost of electricity, many people chose to set up in countries where the power is cheap like China, Kuwait and Iceland.
Crypto mining energy usage
According to top-down estimates of cryptocurrency mining electricity consumption in the United States, the industry was responsible for an excess of 27.4 million tons of carbon dioxide between mid-2021 and 2022. That is three times the amount emitted by the largest coal plant in the United States in 2021.
In another study, Bitcoin was estimated to be responsible for 60% to 77% of all the electricity used by crypto assets worldwide as of August 2022. Ethereum will be responsible for 20% to 39%. However, due to Ethereum’s switch to proof-of-stake, Ethereum 2.0 has reduced it’s carbon footprint by nearly 99.99%
Greener Alternatives?
Amongst the growing concerns of electricity consumption, in June 2019, Coinshares conducted research revealing 74% of mining runs on renewable energy.
Bitcoin mining tends to be more prevalent in regions where there are ample supplies of renewable energy such as solar, wind or hydro-power. For example, in the US, most mining is run in Washington State, where power costs are cheaper because of the implementation of hydroelectricity.
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Frequently Asked Questions
How much energy does Ethereum use?
Pre-Merge, in 2022, Ethereum’s annual energy consumption ranged from 46.31 terawatt hours (TWh) to 93.98 TWh. On December 26, 2019, 4.75 TWh of energy were used by Ethereum, the least amount ever. Post-Merge, Ethereum has reduced its carbon footprint by 99%.
Is cryptocurrency bad for the environment?
The mining of cryptocurrency can consume a lot of electricity. This process can potentially increase local pollution, noise, and other effects on nearby communities as well as greenhouse gas emissions. Due to this fact, many consider cryptocurrency environmentally unfriendly.
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