Why does Bitcoin consume so much electricity? A question that can be answered in three words: Proof of Work. This is the mechanism Bitcoin uses to secure the network. After all, it is decentralized and thus has no central authority to make sure that everything runs correctly.

Proof of Work

Proof of Work is a part of Bitcoin mining. Mining requires enormous computing power to solve mathematical problems. They have to try new number combinations for each block in the blockchain until they find the right solution. If they find the correct solution, they receive Bitcoin as a reward. As the number of miners constantly increases and the difficulty of the problems grows, so does the energy requirement.

Another reason is the competitive nature of mining. As many miners compete for rewards, they must maximize their computing power to gain an advantage. This leads to an arms race involving increasingly powerful computers and specialized hardware. The more popular Bitcoin and the blockchain become, the more power is required. Depending on statistics, Bitcoin's power consumption is as high as that of entire countries. Is this still justifiable in times of global warming?

Bitcoin energy consumption: is it justified?

If Bitcoin were actually used as a global monetary system, this question would not have to be asked. Bitcoin uses far less energy than, say, banks, which require administrative buildings, employees, vending machines, paper and more to operate.

The problem is that Bitcoin does not replace the global financial system, but rather joins the financial system and serves much more as an investment vehicle than as a global currency. So Bitcoin's electricity consumption just adds to other electricity consumption. And we can't really afford that. Anyone who trades Bitcoin, owns Bitcoin or otherwise deals with proof-of-work cryptocurrencies should be aware of this.

Bitcoin energy consumption: what to do?

At this point you could lapse into whataboutism and list everything that wastes energy: Christmas lights, cars, the fashion industry, gyms you name it. But that doesn't help. Turn off Bitcoin? Also not an option.

One fact is that everyone needs to take responsibility for their own energy consumption and emissions. If you already invest in cryptocurrencies, maybe you can step back somewhere else. Maybe you can generate enough profit from your investments to use the money to improve your carbon footprint.

Also read: Michael Saylor defends Bitcoin and Proof-of-Work