Several studies and reports have revealed the crypto industry’s annual energy consumption exceeds that of many countries combined. Crypto mining accounts for the largest share of the industry’s total energy consumption. That has impacted growing fears over cryptocurrencies’ tremendous environmental footprint. Some companies, including Tesla, even announced they would halt accepting crypto to tame the industry’s environmental impacts. You can click on eKrona to learn more about bitcoin trading.
Several Bitcoin mining companies have already shifted to renewable energy to power their operations and reduce the sector’s heavy reliance on costly and harmful energy sources. While it is important to point out Bitcoin mining’s high energy consumption, it is equally essential to know why it happens. That would enable miners to determine the most suitable solutions to pursue without hindering Bitcoin operations.
Understanding Bitcoin Mining
First, understand how Bitcoin mining occurs to know why it is so energy-intensive. Bitcoin mining involves minting new tokens for circulation. Miners serve as auditors, verifying and validating the authenticity of every Bitcoin transaction on the blockchain. Miners get rewarded in Bitcoin after completing 1MB worth of verifications.
However, crypto mining involves solving complex mathematical puzzles to generate a hash, and only the first miner to complete it receives the rewards. The hash is a 64-digit hexadecimal number. That ensures every new block validates the subsequent one, creating the blockchain.
Apart from minting new Bitcoins for circulation, miners play a critical role in maintaining the security and transparency of Bitcoin’s decentralized network. They verify and confirm Bitcoin transactions almost every ten minutes, preventing users from double-spending and manipulating transactions. Double spending refers to using the same tokens for two separate transactions.
Bitcoin Mining and Energy Consumption
In the early days of Bitcoin, people mainly used ordinary computers for mining activities. The increasing Bitcoin value has attracted several miners from different parts of the world. However, Bitcoin has an ideal supply of 21 million tokens only, with about 83% already mined. That means the number of available Bitcoins for mining also decreases over time.
Thus, the mathematical puzzles that miners must solve to generate new coins and confirm Bitcoin transactions have also become more complex. Solving those math problems requires powerful computational hardware with high processing power and speeds that generate thousands, millions, and billions hashes every second. Those devices need a lot of electricity to run, impacting the high amounts of energy used in Bitcoin mining.
Bitcoin adoption has exponentially increased over the years, with the majority using it as payment for goods and services. The increased Bitcoin usage means the number of transactions miners must verify also grows across the network.
The robust transactions on the Bitcoin network make it imperative for miners to remain engaged 24/7. The constant usage of the energy-intensive Bitcoin mining hardware undoubtedly increases the overall electricity consumption. Besides, solving the math puzzles is a trial-and-error process that requires computers to run constantly to have the best chance of finding the key, verifying the latest transaction block, and receiving the rewards.
Today, experts believe Bitcoin mining consumes an estimated 116 terawatt-hours or 116 trillion watts per year. That is about half a percentage of the world’s total electricity supply, higher energy consumption than most countries. Meanwhile, a recent study revealed 39% of crypto mining operations use renewable energy.
Bitcoin mining is undoubtedly a highly energy-intensive activity. That mainly results from the constant usage of powerful computational hardware to verify Bitcoin transactions and mint new Bitcoins for circulation. Nevertheless, crypto miners have begun shifting to alternative energy sources and more energy-efficient mining hardware.