Bitcoin Network Consumes a Ton of Electricity

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Bitcoin Network Consumes a Ton of Electricity

The awareness and adoption of cryptocurrency is at an all-time high where even governments and financial institutions that have underestimated the fintech revolution as an internet bubble have come to accept the benefits of decentralized technology. Bitcoin, the king of cryptocurrency that started it all, is now seen as a powerful financial tool and a parallel investment vehicle. However, one major aspect of bitcoin is that the enormous energy consumption for transaction verification and securing the network has been the cause of many people's anger.

The high energy consumption of the bitcoin network is directly related to the mining consensus of Proof-of-Work (PoW).

A brief history of PoW and how it works?

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

There are many questions about the PoW algorithm about how it works and how much energy is consumed. Well, the main purpose of PoW is to create a new block and to confirm all transactions. It contains a record of all transactions related to Bitcoin, plus it is fully decentralized and promotes transparency. It is true that this consensus algorithm uses a lot of energy which means it involves very high costs. Although mining machinery has evolved a lot over the past few years and claims to be more energy efficient, it still consumes a lot of energy.

The PoW mining consensus ensures equality because it offers equal opportunity for every miner who wants to mine the next block, and once the block is mined, he distributes block prizes according to the energy input made by each miner in finding the next block. This algorithm is very different from another popular mining consensus called Proof-Of-Stake (PoS), where the network selects the next miner to find a block. This mining consensus might reduce electricity waste but is not as stupid as PoW.

Back in 2018, Vitalik Buterin, one of the founders of Ethereum, the second largest cryptocurrency, called PoW a tragedy. Buterin quotes that PoW uses billions of dollars of electricity every year and there is still so much theft and fraud.

Bitcoin energy consumption and what is the equivalent?

Through several types of research, it is estimated that Bitcoin mining actually uses around 1% of total world energy consumption. Bitcoin mining is a process through which new coins are generated and carried out by solving very complex computational equations with the help of some very special computers. Along with adding new Bitcoin to circulation, mining also ensures network security. To make more money through the mining process, more miners have been added to the network, which in turn leads to higher energy consumption because all miners will work constantly.

Researchers at Cambridge University jumped into the debate about energy consumption of Bitcoin and conducted the same research. In their research, they found that the complete Bitcoin network around the world consumed more than 7 gigawatts of electricity and for a full year, total energy consumption was around 64 terawatt-hours.

They have compared this energy consumption with various countries and found that the total energy consumption of the global Bitcoin network is more than the energy consumption of all of Switzerland during the same time period. The research team has also created an online tool, the Cambridge Bitcoin Electricity Consumption Index (CBECI) that is there to find out how much energy is needed by the Bitcoin network to maintain the network.

The Bitcoin network actually uses renewable energy

Every time the Bitcoin energy consumption debate is revealed, there are many claims that Bitcoin emits a high amount of carbon dioxide. Some people even claim that these emissions are the same as those emitted by many big cities like Las Vegas. So the question is is Bitcoin really an environmental disaster? According to a researcher, Robert Sharratt, Bitcoin is not a danger to the environment and it undermines this myth that is generally spread by most people. He has dispelled many people's doubts about the energy consumption and carbon footprint associated with cryptocurrency. He accepted the fact that Bitcoin or other cryptocurrency did use a lot of energy but in any case it was not comparable to what many people predicted. Sharratt also explained that crypto uses the world's largest computer network so that the carbon footprint associated with it is truly moderate. He further explained the benefits of using cryptocurrency and how to promote wealth equality.

Another study by Coinshares in June last year revealed that although energy consumption from the Bitcoin network was high, the carbon footprint dilemma was artificially created because the energy consumed by the bitcoin network was generally clean and renewable energy. CoinShares publishes a report stating that most of the energy consumed by Bitcoin comes from natural resources such as Hydro, Wind and Solar power. He claims that 74.1% of the total energy consumed by Bitcoin is renewable which is very similar to other large scale industries.

The safest network

Despite the fact that there is a large energy consumption in Bitcoin, many people still prefer to hold fast to Bitcoin. The reason is the security this network provides. Over the past few years, it has been seen that the Bitcoin network is very safe and the main reason for this security is the blockchain. Bitcoin is supported by Blockchain and every transaction that occurs on this network is encrypted with a blockchain which adds extra security to the network. Blockchain helps keep all users' personal information completely safe and protect their privacy so that there is no possibility of fraud or hacking. Therefore, it is said that Bitcoin is the safest network than before.

Conclusion

Since we have discussed all of the energy consumption of Bitcoin and the use of renewable energy, the end note is that Bitcoin has now emerged as one of the best digital currencies. Although it consumes a lot of energy, it is a fact that is proven through many studies that the majority of energy consumed by Bitcoin is renewable. Therefore, it is very clear that Bitcoin is not harmful to the environment as many have claimed.