Why does Bitcoin require so much energy?

Bitcoin has increasingly come under criticism for its network’s intense energy consumption. Find out more about Bitcoin’s energy usage.

Several crypto critics have continually raised concerns over Bitcoin’s immense energy consumption, citing its negative environmental impact. While the Bitcoin network comprises various activities that require power, the intense energy consumption mainly comes from Bitcoin mining.

The Bitcoin network currently uses about 116 terawatt-hours or 116 trillion watts annually. That is about 0.5% of the world’s total electricity production. The Bitcoin network uses more electricity than many countries today. While crypto supporters argue that much of the energy that Bitcoin consumes is renewable, statistics show that about 39% of crypto mining operations use renewable energy. So, what is Bitcoin mining, and why does it require so much power?

Bitcoin Mining and Energy Consumption 

Bitcoin mining creates new tokens for circulation. It is a necessary process that also entails validating transactions to avoid double-spending. Unlike fiat currencies that governments issue and regulate, Bitcoin is a decentralized currency without any governing authority. Thus, its network, also known as the blockchain, validates all transactions on a ledger to ensure transparency and security against fraudulent transactions.

The Bitcoin network comprises thousands of independent computers in different geographical locations worldwide. Whenever one transacts Bitcoin, most computers must verify the transactions and validate the records on a public ledger. Miners add blocks to the blockchain every ten minutes, which is already energy-intensive.

Bitcoin miners use highly sophisticated computing hardware and software to crack mathematical problems, create new coins and validate transactions. However, only the first computer to solve the puzzle or find the key receives the rewards in Bitcoin. The awards decrease by half every four years.

Thus, Bitcoin mining is a highly competitive endeavor that requires miners to work 24/7. Running the machines to solve those cryptographic puzzles requires an immense amount of energy. However, the process is primarily trial and error, and miners must attempt several hashes before finding the closest target hash to the most recent block.

Miners must run their computers constantly to get the best chances of finding the key, verifying the latest Bitcoin transaction block, and receiving the rewards. The computer hardware that miners use can generate thousands, millions, and billions of hashes per second. That requires an enormous amount of energy.

The incredible rewards and Bitcoin’s increasing value has made mining a lucrative endeavor, attracting many individuals and companies globally. Besides, the difficulty of solving cryptographic puzzles increases gradually. That impacts even more energy consumption since miners must now use more powerful computers and work extra hard to earn the rewards.

The Bitcoin network compares to an exchange platform like Bitcoin Profit, where several traders compete for profits. However, the rewards in Bitcoin mining only go to the first miners who solve the puzzle. That impacts a lot of energy wastage since 99.9% of the machines that fail to generate the target hash use electricity in vain. However, the proof of work mechanism ensures fairness and security.

Solving Bitcoin’s Energy Problem 

Crypto advocates have increasingly explored mechanisms to bring down Bitcoin’s intense energy consumption. One of the suggestions that many Bitcoin miners are turning to is using renewable energy to run mining operations. Several crypto startups opt for renewable energy sources like solar, wind, and natural gas to reduce the industry’s carbon footprint. Others have also suggested transitioning from Bitcoin’s proof of work to proof-of-stake systems to minimize the immense energy consumption. The proof-of-stake mechanism removes the competitive computational element, saving energy and other resources.

In a nutshell, Bitcoin requires a lot of energy due to its mining process. Mining this cryptocurrency requires robust, energy-intensive computers. And this increases the overall cost of running the Bitcoin network.