The Truth Behind Bitcoin’s Energy Consumption

Sustainability was introduced in the late 80s and has been a controversial topic of discussion ever since. Some claim that unless we change our attitude towards the environment before 2030, the planet will cease to exist as we know it. Others disregard this threat, calling it a hoax or claiming that this eco-friendly frenzy is just a political tool used by governments to impose further regulations.                      

Environment Meme

Only time will tell who is right and who is wrong, but for now, the present day discussions over sustainability continue. And since Bitcoin mining requires such a large amount of energy, we can’t avoid being involved in the debate.  

Claims have been made that crypto-mining consumes more electricity than 159 countries including Ireland, Croatia and Morocco, that Bitcoin’s expansion will increase the planet’s temperature by 2C and that it will be “The Nail In The Coffin of Climate Change”.

But what exactly is the truth? Before jumping to conclusions and making loud statements about Bitcoin’s negative impact on our planet, let’s look at the coin’s energy consumption in more detail.

How much energy does Bitcoin consume? 

Despite the fact that bitcoin mining does consume a lot of electricity (estimated to be around 30 TWh annually), the devil is in the details. According to a study conducted by CoinShares, a digital asset management firm, nearly three quarters of the energy used for bitcoin mining comes from renewable sources.

One of these sources exists in Sichuan, a mountainous province in Southwest China. It’s reported that 60% of all bitcoin mining happens in this country, and that 70% of that happens in Sichuan, making it home to one of the biggest renewable mining operations worldwide. 

Over 3000 hydro-plants come alive from May to October as the heavy rainfall experienced by the region is used to generate electricity. Not only does this process give miners access to an abundance of low cost energy, but this energy is clean.  

Renewable-driven mining also takes place in Eastern Canada, Scandinavia and Cascadia, but there’s still work to be done as areas in China and Iran are using electricity produced by coal and natural gas. Whilst not perfect, the situation seems a whole lot better than what the hysterical headlines seem to portray, don’t you think?

Bitcoin Headline

How do fiat currencies compare?

Bitcoin mining and its impact shouldn’t be looked at in isolation either, as it’s true that most human activities, including being alive, negatively affect the environment too. 

For example, whilst it’s fairly easy to calculate the cost of Bitcoin (i.e the expenses for mining - equipment, electricity and personnel), it’s nearly impossible to accurately calculate the costs associated with using fiat currencies. 

This is because there are simply too many things to consider, from the raw materials (like precious metals, paper and cotton), to the cost of transporting the currencies, building the facilities, running the facilities, of minting the money, running the servers required to support the current system, and making the payments to the middle men required for domestic and international transactions… the list continues. 

Although the true numerical cost is therefore yet to be figured out, we’re pretty certain that the number would underline bitcoin’s status as an eco-friendly currency, or at least far more eco-friendly compared to fiat currencies.

Skeleton Meme

And let’s not forget that as the issue of global sustainability continues to be pushed to the forefront of our social, political and economic spheres, Bitcoin adopters are listening, and they are trying. Which is more than can be said for the majority of governments. 

Can Bitcoin become more sustainable?

Proof of Stake 

One option being explored relates to the protocol used by Bitcoin. Those familiar with it and blockchain technology may already be aware that Proof of Work (PoW) is the protocol used to deter cyber-attacks and to verify the legitimacy of a transaction in the blockchain. 

Generating this PoW is currently the most important and costly task undertaken by miners, and is therefore the main reason as to why the cryptocurrency is accused of damaging the environment. 

If PoW was replaced with less energy intensive consensus mechanisms, it would have an immediate impact on the amount of electricity consumed by miners. There are many different options available, like Proof of Storage, Proof of Burn, Proof of Capacity, Proof of Activity, with the most prominent being Proof of Stake (PoS).

BlockGeeks - Proof of Work v Proof of Stake

Source - Blockgeeks

PoS, unlike PoW, doesn’t require solving a complex algorithm to confirm a transaction in the blockchain. In fact it doesn’t require miners at all, only validators. Each user is randomly chosen to validate the next block, based on their stake’s size and age - i.e the amount of crypto that they own, and how long they’ve had it, and rewarded with the fee associated with the transaction. 

Whilst replacing the costly PoW mechanism with PoS could drastically reduce electricity costs, Bitcoin as we now know it could cease to exist for two reasons. First, the PoS protocol is not laid out in the original Bitcoin Whitepaper, which not only poses a consensus issue amongst the Bitcoin community, but could potentially result in a new cryptocurrency fork. 

Second, even if we assume that the Bitcoin development community would unanimously agree on the new protocol, switching to it would all but centralise the power of the network into the hands of only a few. 

This is because bitcoin whales, those who hold large quantities of BTC, would end up reaping the rewards of validating transactions, transactions that would additionally require more storage space and result in increased energy costs too.

As you can see, the reality of actually switching protocols is neither desirable nor beneficial. Community and consumer trust in bitcoin, or the new type of bitcoin, would be irreversibly damaged, and users may be pushed towards other more decentralised cryptocurrencies instead. 

And so whilst the PoS mechanism may seem perfect for reducing energy consumption in isolation, the impact of changing the entire Bitcoin network algorithm to acquire this benefit would simply be detrimental to the way in which the cryptocurrency currently functions. 

But all hope is not lost on this journey to sustainability, as there’s still one more road to go down. 

Mining Locations

We mentioned earlier that nearly three quarters of the energy used to mine Bitcoin currently comes from renewable resources, with China, Georgia, Canada and Sweden leading the way due to their relatively cool climates and pre-existing hydroelectric facilities.

This means that there’s just over one quarter left that’s produced using harmful fossil fuels, but thanks to the cryptocurrency’s truly progressive form, it’s looking likely that it won’t stay that way  for long. 

Map of Mining Facilities

Source - CoinShares

One of the main reasons for this lies in a bitcoin miner’s mobility. Unlike your standard banking facilities, which need to be located in densely populated areas to serve the general public, mining facilities can be erected in the middle of nowhere. 

This suits renewable energy, which tends to be generated in remote areas and is often difficult to harness and use. But as bitcoin miners are not tied to specific infrastructure, they’re able to move to where the energy is generated, as long as the area itself is accessible and politically stable.

Not only does this save on energy transportation costs and increase profitability for miners, as they can set up right next to solar power plant or hydroelectric dam, but it also reduces the problem of wasted renewable energy in many of the hidden corners of the world. 

There are also projects like Hydrominer, which are trying to streamline and replicate hydro-electric mining process in a range of different countries, so that - contrary to what the news may lead you to believe - renewable energy can continue to dominate bitcoin mining. 

So is Bitcoin really killing the planet? 

The truth? No. In fact, according to CoinShares, Bitcoin mining is actually much ‘more renewables-driven than almost every other large-scale industry in the world’. But with global media outlets grossly overestimating Bitcoin’s polluting impact, the positive steps made by the cryptocurrency continue to get overlooked. 

That’s why we’re here though, to shout about Bitcoin’s progress and keep the dream alive. Why not get involved and drop us a tweet @Cloudbet with your thoughts on bitcoin’s sustainability? We’d love to hear what you think.


Cloudbet is one of the first bitcoin sportsbook and casino operators in the crypto space. We have hundreds of bitcoin slots and dozens of table games to play, with free play options to try before you buy in our bitcoin casino. You can also read more on betting strategies, bitcoin 101, and in-depth crypto stories here in the Cloudbet Blog.

About the Author
Cloudbet

Cloudbet

Cloudbet

Posted on 2019-07-24

Cloudbet has a team of contributors that produce high quality content across a range of subjects related to betting and crypto.

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