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Bitcoin Energy Consumption: Ways to Solve The Substantial Problem?

Cryptocurrencies like Bitcoin and Ethereum have been in the news a lot recently, but not necessarily for the right reasons. With interest from major institutions such as JPMorgan and Goldman Sachs along with endorsements from tech titans like Tesla’s CEO Elon Musk, Bitcoin’s value has managed to go up more than 700% in the space of a year. However, Bitcoin energy consumption is raising concerns. Here’s how we could solve this problem.

Bitcoin’s Energy Consumption Problem

Bitcoin is the first and most popular cryptocurrency. It’s designed as a peer-to-peer payment system that uses a decentralised swarm of computers, which records transactions in a distributed ledger called a blockchain. Bitcoin uses a validation method called Proof of Work to confirm groups of transactions called blocks. It consists of Bitcoin miners running complex computer rigs to solve complicated puzzles. Upon success, these blocks are added to the blockchain record and the miners are rewarded with some bitcoin.

In doing so, these computers consume huge amounts of electricity. Bitcoin currently has a yearly consumption of 135.59 TWh, according to an online tool by the University of Cambridge. This is more than countries like Ukraine (128.81 TWh) and Sweden (131.80 TWh)!

Graph of Bitcoin energy consumption compared to other countries
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Source: Cambridge Bitcoin Electricity Consumption Index

Despite 39% of its electricity requirements coming from renewable sources, Bitcoin energy consumption is still considerably impacting the environment.

Solutions to Bitcoin Energy Consumption

Bitcoin clearly consumes a lot of electricity, which impacts the environment as most of it comes from non renewable sources. However, this doesn’t mean we should stop using Bitcoin seeing as it may well be the future of finance. There are indeed several solutions to this problem, that could help make Bitcoin a lot greener.

Switch to Proof of Stake

Proof of Stake was created as an alternative to Proof of Work (PoW), to tackle the risk of network attacks and of course the energy consumption.

Proof of Stake seeks to address this issue by attributing mining power to the proportion of coins held by a miner.

Instead of utilizing energy to answer Proof of Work puzzles, a Proof of Stake miner is limited to mining a percentage of transactions that is reflective of their ownership stake. For example, a miner who owns 2% of the Bitcoin available can theoretically only mine 2% of the blocks.

If Bitcoin and other cryptocurrencies were to switch to this method, we would see a sizeable decrease in blockchain energy consumption.

Or Proof of Authority

Slightly less well-known, Proof of Authority is another consensus method that is equally as efficient (if not more). It gives a small and designated number of blockchain actors the power to validate transactions or interactions with the network and to update its more or less distributed registry.

One or more validating machines are responsible for generating new blocks of transactions that will be included in the Blockchain. These blocks can then be accepted directly without verification, or by unanimous vote of the block generators, or simply by a majority, depending on the configuration chosen for the Blockchain.

This consensus mechanism requires almost no computing power, and therefore almost no electricity for its operation.

It does have one major downside, however: strong centralisation in the hands of a small number of actors. This sort of defeats one of the aims of Bitcoin which is to be a decentralised financial system.

Sustainable Mining

water dam between mountains
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Photo by JACK REDGATE on Pexels.com

Mining is primarily responsible for the exceptionally high energy demands of the blockchain. Making it more sustainable could significantly reduce Bitcoin’s energy consumption.

For instance, Chinese mining farms have for a while used Hydroelectric power. The power mining equipment draws cheap surplus energy from hydroelectric dams. Although the concept takes its roots in China, other operations have emerged worldwide. HydroMiner Limited Company, for instance, harnesses the output of hydroelectric dams in the Austrian Alps. Furthermore, the Austrian climate is ideal for keeping their hardware cool by rerouting water from the rivers.


Also, a UK cryptocurrency firm has announced plans to create the world’s first clean energy Bitcoin mining pool. Argo Blockchain, based in London, has partnered with DMG Blockchain Solutions to launch the first Bitcoin mining pool powered by only clean energy.

The “Tera Pool” project will reduce Bitcoin’s impact on the environment without reducing Bitcoin energy consumption. It’s set to be the first “green Bitcoin”, and hopefully, other companies will follow their lead.

“Partnering with DMG to create the first ‘green’ Bitcoin mining pool is an important step towards protecting our planet now and for generations to come. We are hopeful other companies within the Bitcoin mining industry follow in our footsteps to demonstrate broader climate consciousness”

Peter Wall, Chief Executive of Argo Blockchain

Bottom Line

With cryptocurrency playing a key role in the future of finance, it’s undoubtedly here to stay. However, Bitcoin energy consumption is definitely a problem. With an electricity consumption equivalent to entire countries, Bitcoin and other cryptocurrencies are having a sizeable impact on the environment. Thankfully, constant innovation in both blockchain and mining will undoubtedly reduce this impact before too long. Ethereum, for example, has announced that it’s moving to Proof of Stake, which will massively reduce its consumption. Let’s hope others will follow.


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Scott Hickman

Founder of The Detechtor and host of The Detechtor Podcast | Techy | Politics enthusiast | Musician | Loves coffee ☕️

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