Since their emergence in 2010, cryptocurrencies have steadily gained popularity, especially within the decentralized finance sector. Currently, over 5,000 different cryptocurrencies circulate globally, with Bitcoin, the most prominent cryptocurrency, accounting for nearly half of the total market value of cryptocurrencies in circulation. However, this growth has a downside: the substantial energy cost associated with mining, particularly for cryptocurrencies like Bitcoin that use the Proof of Work (PoW) protocol.
Proof of Work, is a transaction validation method on the blockchain which is primarily used to ensure the integrity of decentralized networks. In practice, mining relies on computer systems with essential components like motherboards and graphics cards. These cards, often in large quantities, perform most of the calculations needed to validate transactions and secure the blockchain. Miners are incentivized to participate in this process because they receive tokens, such as Bitcoin, when they successfully solve complex equations required to add a new block to the chain.
However, PoW has a major drawback: its exorbitant energy cost. Each mining operation requires immense computing power, and thus, a vast amount of electricity. For example, it’s estimated that, on average, mining a single Bitcoin consumes 1,449 kWh. This figure can vary depending on the equipment and infrastructure of each miner, as well as local economic conditions. In 2022, the energy cost of mining one Bitcoin varied significantly between countries, costing approximately $250,000 in Venezuela compared to just $1,400 in Kuwait.
The United States, representing 37.9 % of global Bitcoin mining, with around 170 Bitcoin produced daily, is a prime example of the energy impact of large-scale mining. In the U.S., the electricity used to mine Bitcoin over one year is equivalent to what would be needed to power 5,000,000 million households. Globally, Bitcoin mining consumes about 140,336 GWh annually, which is more than the yearly electricity consumption of countries like Ukraine or Malaysia, according to data collected by Best Brokers.
These astronomical figures raise a fundamental question about whether the energy cost of cryptocurrency mining, particularly for Bitcoin which far exceeds that of many industrial sectors is worth it. As energy consumption becomes a crucial issue for the planet’s future, it’s legitimate to question whether the potential gains from mining justify such an ecological footprint. Alternatives like Proof of Stake (PoS) are beginning to emerge, although they have not yet been to be widely adopted. The challenge, therefore, is to balance technological innovation with energy sustainability.
Sources:
https://www.mapetiteenergie.com/aides/consommation-electrique-minage-bitcoin-cryptos
