Key Network Statistics
|Bitcoin's current estimated annual energy consumption* (TWh)||10.29|
|Estimated annual energy costs||$617,262,542|
|Country closest to Bitcoin in terms of energy consumption||Paraguay|
|Estimated energy used over the previous day (KWh)||28,185,504|
|Current break-even Watts per GH/s (used for calculating the index)||0.426|
|Energy consumed per transaction (KWh)||101|
|Number of U.S. households that could be powered by Bitcoin||952,566|
|Number of U.S. households powered for 1 day by the energy consumed for a single transaction||3.40|
|Bitcoin's energy consumption as a percentage of the world's energy consumption||0.05%|
*The assumptions underlying this estimate can be found here.
Did you know?
Ever since its inception Bitcoin’s trust-minimizing consensus has been enabled by its proof-of-work algorithm. New sets of transactions (blocks) are added to Bitcoin’s blockchain roughly every 10 minutes by so-called miners. While working on the blockchain these miners aren’t required to trust each other. The only thing miners have to trust is the code that runs Bitcoin. The code includes several rules to validate new transactions. For example, a transaction can only be valid if the sender actually owns the sent amount. Every miner individually confirms whether transactions adhere to these rules, eliminating the need to trust other miners.
The trick is to get all miners to agree on the same history of transactions. Every miner in the network is constantly tasked with preparing the next batch of transactions for the blockchain. Only one of these blocks will be randomly selected to become the latest block on the chain. Random selection in a distributed network isn’t easy, so this is where proof-of-work comes in. In proof-of-work, the next block comes from the first miner that produces a valid one. This is easier said than done, as the Bitcoin protocol makes it very difficult for miners to do so. In fact, the difficulty is regularly adjusted by the protocol to ensure that all miners in the network will only produce one valid bock every 10 minutes on average. Once one of the miners finally manages to produce a valid block, it will inform the rest of the network. Other miners will accept this block once they confirm it adheres to all rules, and then discard whatever block they had been working on themselves. The lucky miner gets rewarded with a fixed amount of coins, along with the transaction fees belonging to the processed transactions in the new block. The cycle then starts again.
What kind of work are miners performing?
The process of producing a valid block is largely based on trial and error, where miners are making numerous attempts every second trying to find the right value for a block component called the “nonce“, and hoping the resulting completed block will match the requirements (as there is no way to predict the outcome). For this reason, mining is sometimes compared to a lottery where you can pick your own numbers. The number of attempts (hashes) per second is given by your mining equipment’s hashrate. This will typically be expressed in Gigahash per second (1 billion hashes per second).
The continuous block mining cycle incentivizes people all over the world to mine Bitcoin. As mining can provide a solid stream of revenue, people are very willing to run power-hungry machines to get a piece of it. Over the years this has caused the total energy consumption of the Bitcoin network to grow to epic proportions, as the price of the currency reached new highs. The entire Bitcoin network now consumes more energy than a number of countries, based on the Key World Energy Statistics published by the International Energy Agency. If Bitcoin was a country, it would rank as shown below.
Countries by Energy Consumption
|Rank||Country||TWh per Year|
Comparing Bitcoin to other payment systems
To put the energy consumed by the Bitcoin network into perspective we can compare it to another payment system like VISA for example. Even though the available information on VISA’s energy consumption is limited, we can establish that the data centers that process VISA’s transactions consume electricity equal to that of 50,000 U.S. households. We also know VISA processed 82.3 billion transactions in 2016. With the help of these numbers, it is possible to compare both networks and show that Bitcoin is extremely more energy intensive per transaction than VISA.
VISA Network Statistics
|VISA's estimated annual energy consumption (TWh)||0.54|
|Number of U.S. households that could be powered by VISA||50,000|
|Energy consumed per transaction (KWh)||0.00651|
|Number of seconds the energy consumed by 1 VISA transaction could power 1 U.S. household||19|
|Number of VISA transactions that could be powered with the energy consumed by 1 Bitcoin transaction||15,464|
Of course, these numbers are far from perfect (e.g. energy consumption of VISA offices isn’t included), but the differences are so extreme that they will remain shocking regardless. One could argue that this is simply the price of a transaction that doesn’t require a trusted third party, but this price doesn’t have to be so high as will be discussed hereafter.
Even though proof-of-work was the first consensus algorithm that managed to prove itself it isn’t the only consensus algorithm, as more energy efficient algorithms like proof-of-stake have been in development over recent years. In proof-of-stake coin owners create blocks rather than miners, thus not requiring power hungry machines that produce as many hashes per second as possible. Because of this, the energy consumption of proof-of-stake is negligible compared to proof-of-work. Bitcoin could potentially switch to such an consensus algorithm, which would significantly improve sustainability. The only downside is that there are many different versions of proof-of-stake, and none of these have fully proven themselves yet. Nevertheless the work on these algorithms offers good hope for the future.
In order to calculate the energy consumption of all miners in the Bitcoin network it is required to make several assumptions, as there is no central register with all active machines (and their exact power consumption). However, since the total network hashrate can be calculated, it is possible to determine the break-even point for mining revenues versus costs. Mining rewards are always equal to the proportional contribution to the total network hashrate (on average), hence the profitability of mining hardware ultimately depends on the variable (electricity) costs per Gigahash/sec (GH/s). For the Bitcoin Energy Consumption Index it is assumed that the average amount of Watts consumed per GH/s is equal to the amount of Watts that can be afforded by mining revenues per GH/s.
The previous method still requires an estimate of the average price per kilowatt-hour (KWh). This amount differs significantly per country, ranging from 9 cents in the U.S. to as low as just 4 cents in some Chinese regions. The break-even point has been calculated based on a price of 6 cents per KWh. This is not an arbitrary number, but based on information provided by professional miners such as, for example, ViaBTC. The latter offers cloud mining contracts that include electricity costs of 0.35 CNY per KWh (per November 2016). This translates to roughly 5 cents per KWh in USD.
The Bitcoin Energy Consumption Index is the first real-time estimate of the energy consumed by the Bitcoin network, but certainly not the first. A list of articles that have focussed on this subject in the past are featured below, and Blockchain.info even used to provide a point estimate for the total electricity costs. These articles have served as an inspiration for the Energy Index, and may also serve as a validation of the estimated numbers.
|Article||Publish Date||Estimated TWh per Year||Bitcoin Price (USD)||Network Hashrate (GH/s)||Watts per GH/s|
|Proof of Work Flaws: Ethereum Lays Out Proof of Stake Philosophy||07/01/2017||0.00||909||2,397,564,011||0.00|
|Bitcoin and Energy Consumption; An Unsustainable Protocol That Must Evolve||01/01/2017||0.00||1,000||2,512,370,224||0.00|
|Bitcoin Could Consume as Much Electricity as Denmark by 2020||29/03/2016||3.02||426||1,194,369,655||0.29|
|Bitcoins are a waste of energy - literally||05/10/2015||3.94||239||435,318,014||1.03|
|Bitcoin is Unsustainable||29/06/2015||1.87||249||353,633,397||0.60|
|Virtual Bitcoin Mining Is a Real-World Environmental Disaster||12/04/2013||0.33||119||60,000||636.99|
If you find an article missing from this list please report it here, and it will be added as soon as possible.