The Rise in Energy Consumption from the Bitcoin Blockchain

The Rise in Energy Consumption from the Bitcoin Blockchain


Ever since Bitcoin was established as the first cryptocurrency running on blockchain technology, its proof-of-work algorithm with the purpose of minimising trust, was performed by a miner. A miner is an electricity guzzling machine that produces a given number of hashes per second in the hopes of validating a new block of transactions for the Blockchain. The miner in return is rewarded with a fixed amount of Bitcoin plus the transaction fees for completing the pending transactions.

Understanding the miners are not required to trust each other; the only thing miners must trust is the Bitcoin protocol. The protocol contains several rules to validate an ongoing transaction. These rules govern the miners and the issue of trust is avoided as miners individually are tasked with ensuring each transaction is authentic.

The hashes per second determines the work rate of an individual miner. But considering miners as a community that are actively competing against one another, considerable amounts of power would be consumed to successfully form the next block in the Blockchain. Approximately every 10 minutes a new block is added to the Blockchain and the difficulty of producing a new block is regularly adjusted. This implies that periodically more energy is needed to mine the next block.

“A cost of Production Model for Bitcoin” written by Adam Hayes states that “The difficulty adjustment acts as a stabilizing mechanism, increasing the cost of production; as more aggregate mining power is brought on line, the mining difficulty increases.”


The Theory behind the Increases in Energy Usage


In the abstract of his paper, Hayes goes on to mention that Bitcoin mining does “resemble a competitive market” and thus “miners will in theory produce until their marginal costs equal their marginal product”.

This suggests that in current market conditions, marginal product, the reward for producing the next block, is greater than the marginal cost of production and that miners will continue to add hashrate in order to remain profitable.  

The variable cost of electricity would determine if a miner remains profitable. The mining, transportation and installation of the mining equipment can be thought of as a one-time cost and usually easily recoverable.


Energy Consumption within the Bitcoin Blockchain


The Bitcoin Energy Index shows energy consumption has risen substantially. In a one-year period between April 2017 – 2018, the energy required to power the Bitcoin Blockchain grew six-fold. Currently, the Blockchain expenditure is touching 60 TWh/year rising from approximately 10.5 TWh/year.


Source 1:


Diving deeper into the units of measure, we are aware that hashes per second relates to the work rate a mining machine is operating at. However, the units of measure here include Watts. Watts is a measure of power. The unit of 1Wh could be used to describe an appliance using 1W every hour of the day. For example, a typical fan heater would require around 4KW of energy and if the fan heater was switched on for an hour, it would require 4KWh of energy. Upscaling this for the Bitcoin Blockchain which requires 60 TWh/year, this is comparable to the energy consumption for almost all of the Czech Republic or about a quarter of Australia’s energy needs.


Source 2:

Source 3:

It is noticeable from source 3 that global revenue from mining far surpasses the associated costs, thus demonstrating that miners have no intentions of slowing down and instead expect to add more hash rate. Ultimately, less than 0.3% of the worlds electricity consumption is directed towards Bitcoin. This being an incredibly small value shows that Bitcoin itself is still has potential to grow.


Increasing efficiency


It appears that Bitcoin mining is less competitive than first thought, there are several barriers to entry restricting potential miners from enhancing the blockchain further. One of which is the differing cost of electricity around the globe, in some regions of the world where electricity is much more costly, this would be one such limitation on miners. Another major hurdle could occur when Bitcoin price drops and income from mining is reduced, but the cost of remains largely the same. This effectively makes Bitcoin obsolete as source of value.

In his paper, Hayes goes on to state that “Increased efficiency, although necessary to maintain competitive advantage over other miners could serve to drive the value of bitcoin down, however adjustments in the mining difficulty and the regular halving of the block reward throughout time will tend to counteract a decreasing tendency in cost of production.”

However, blockchain technology itself may provide the solution. is a new eco-friendly business that converts waste to energy. Its power plant collects waste, processes it through a high-pressured combustion chamber generating free energy and organic by-products. The energy is transferred to its on-site crypto-mining farm. 4New has also released their own cryptocurrency called the KWATT coin. Each coin contains within it 1 Kilowatt of energy; it is fair to say that each KWATT coin is tokenized electricity.


Energy consumption is expected to continue in the future.


It is clear that Blockchain power consumption will continuously grow as the protocol difficulty steadily increases. The incentive of being awarded new coins and its resulting capital is still a worthy cause for miners worldwide. However, there are several alternatives to meeting the energy levels required to maintain Bitcoin. My preference would be to explore any source of renewable energy that could become the main source of power, as this would seem to have no on-going, variable cost – just a one-off purchasing and installation cost.


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