How does Bitcoin use energy?
Bitcoin's energy consumption comes from so-called mining. In this process, new Bitcoin is created in accordance with the rules of the protocol. At the same time, this protects the entire network against attacks and attackers. The more energy is expended, the more secure the network is.
How much energy does Bitcoin use?
Bitcoin critics often claim that mining consumes more resources, particularly energy, than the value it generates. However, it is not possible to determine exactly how much energy is consumed. However, it is possible to limit the lower and upper end of energy consumption. The latest consumption data can be found at Cambridge Bitcoin Electricity Consumption Index (CBECI).
It must also be considered that energy demand changes with the price of Bitcoin. For example, if the price falls so far that electricity costs are higher than the value of the Bitcoin created, it is no longer worthwhile for rational miners to continue operating their mining devices.
What type of energy does Bitcoin use?
Profitable Bitcoin miners use cheap and stable sources of energy. These sources produce varying levels of CO₂ emissions, but the majority of the network uses renewable energy sources.
According to a study by NYDIG LLC are used for Bitcoin mining to over 50% renewable energy sources used. There are also many practical examples of how energy for Bitcoin mining can be produced sustainably.
For example, El Salvador uses surplus geothermal energy from a volcano to extract Bitcoin.
Bitcoin mining is also increasingly acting as a buyer for otherwise wasted energy in oil production. These are usually by-products of production that are too cost-intensive to allow any other economic use, as storing or transporting this raw energy would be too expensive.
As a result, this energy is often burned or sometimes even released into the atmosphere unburned. Bitcoin miners provide a solution to this problem as they can be operated on a mobile basis and independently of the power grid. This takes the form of a shipping container full of Bitcoin mining equipment, which is delivered directly to the energy source. The gas methane, which is many times more harmful to the atmosphere than CO₂, is converted to CO2 by generating electricity for Bitcoin mining at 99 percent. Before miners used the methane, it was simply burned with a steady flame, with more than half of it still entering the atmosphere unburned. Bitcoin mining can minimize the negative impact on our climate.
Energy efficiency of financial systems
Bitcoin's energy footprint is easier to quantify than in the current financial system and is therefore susceptible to superficial criticism. However, in terms of electricity costs alone, Bitcoin is much more efficient than traditional banking and mining gold on a global scale. Traditional banking emits 1,368 megatons of CO₂ per year and mining of gold emits 144 megatons. Bitcoin, on the other hand, emits 61 megatons, less than 5% and 45% of traditional banking and gold mining, respectively. In return, it offers billions of people access to a global financial market and an apolitical alternative to inflationary currencies.
