All it took was Elon Musk to point out that cryptocurrencies come at a high cost to the economy for the hype and enthusiasm to die down, common sense to prevail, and a little more attention to how much energy these crypto coins consume to be paid attention to. Tesla announced in March that they would consider Bitcoin as a form of payment for their electric vehicles. That is no longer the case. The explanation for this is because when Bitcoins and cryptocurrencies are mined and transactions are completed, more energy is consumed. The problem is that these digital currencies necessitate a network of extremely powerful computers, which necessitates the use of electricity. The data is self-evident. According to data from the University of Cambridge and the International Energy Agency, Bitcoin energy demand would skyrocket in 2021. It isn't just Bitcoin that isn't environmentally friendly. Is there some cryptocurrency that is environmentally friendly?
To be honest, for networks for which energy consumption data is available, we must rely on a combination of what the crypto claims and what the data reveals. The Bitcoin energy consumption index peaked on January 1 last year at 125.42 TWh, or Terawatt-hour, in power consumption. Simply stated, one kilowat (kW) equals 1000 watt-hours (Wh). 1 TWh is equivalent to 1,000,000,000,000 Wh. Scotland, with a population of about 5 million people, consumes around 25 TWh of electricity per year. Bitcoin mining and transactions consumed 5X the amount of energy. And that was before the start of the year, when things really took off. According to the same results, the Bitcoin network consumed 151.16 TWh on May 13, 2021, with a peak of 519.96 TWh consumption. I'm hoping you get the idea.
It would be erroneous and selective to blame Bitcoin for consuming too much energy. We'll continue to use Bitcoin as an example to explain how many cryptocurrencies function, but without the jargon, we'll show why cryptocurrency networks in general consume a tonne of energy. The problem is that digital currency like Bitcoin isn't controlled by a single entity, and its decentralised system necessitates a global network of computers operating at full capacity to perform complicated calculations in order to mine new coins and complete transactions with existing crypto coins. Proof of work is another term for this (PoW). This can last for several hours, if not days. The faster a computer performs these calculations, the faster the process moves—but a powerful computer with a fast processor and graphics card will also increase the amount of energy required. To add to this, we announced in February that Nvidia, a common graphics card brand among gamers, had rolled out a driver update for one of their latest cards because crypto miners were attempting to buy it in large quantities, leaving gamers with an out-of-stock situation. The aim was to cut the RTX 3060's hash rate (mining efficiency) in half for Ethereum miners, making the card less appealing to crypto miners and allowing gamers to purchase it instead.
After Bitcoin, Ethereum is the second most valuable and common cryptocurrency, and it is climbing the consumption ladder at a similar, if not faster, pace. That said, the Ethereum network could make the move from the PoW system to what is claimed to be a more efficient Proof of Stake system later this year. According to data collected by Digiconomist for the Ethereum Energy Consumption Index, Ethereum absorbs electrical energy comparable to that of Hong Kong, with a carbon footprint comparable to that of Lebanon. Every Ethereum transaction uses the same amount of energy as an average US home over the course of 2.82 days. What is a transaction's carbon footprint? You could do the same thing by watching 6,610 hours of YouTube videos.
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