Bitcoin has seen its fair share of challenges since it was introduced in an anonymous whitepaper less than 10 years ago, a relatively short time span when compared to other currencies. But while it has so far managed to meander its way through an uneven landscape marked with high-profile heists, online black markets, inner feuds among developers and regulatory backlash, it now faces another obstacle: energy consumption.

As the popularity, prices and transaction rates of Bitcoin rose in the past year, so did the amount of electricity used by the network. Per estimates, a single bitcoin transaction consumes 824 KWh, enough to power half a million Visa transactions and an average American household for a week. The entire network has an estimate consumption of 56.37 TWh, on par with the total electricity used by the country of Israel, or 0.25 percent of the entire planet.

The continued rise of Bitcoin’s electricity consumption has drawn the attention of environmentalists, especially as the world grapples with problems such as global warming. Some analysts believe that by 2020, the Bitcoin network will consume as much energy as the entire planet does today. Many experts are worried about the carbon footprint that Bitcoin’s energy consumption will create and the disastrous effects it can have on the environment.

Bitcoin’s immense energy consumption has called into question the currency’s sustainability as it continues to grow, as well as many of the initial promises it offered as a decentralized method of payment that can be used by anyone for many different purposes. But the situation is not all that dire, and there are already solutions in the works to make Bitcoin greener and less energy-consuming. As with everything related to Bitcoin and cryptocurrencies in general, only time will tell whether the network will manage to adapt to keep pace with its accelerating growth.

A primer on Bitcoin mining

To process its transactions, Bitcoin relies on the blockchain, a decentralized network of computers all over the world that maintains, verifies and updates its ledger. Every ten minutes, a new block of Bitcoin transactions is added to the blockchain. But before that happens, a large number of computers have to verify and confirm the transactions contained within it. This process, called “mining,” involves nodes solving a complicated and computationally intensive mathematical puzzle. With every block added to the blockchain, a fixed number of new bitcoins are released as a reward (on top of the fees associated with the transactions that form part of the block) to the first computer (or cluster of computers) to solve the mining puzzle. When Bitcoin launched in 2009, each new block came with a 50-bitcoin reward for the miner who mined it. This figure halves every four years and currently stands at 12.5 bitcoins.

This mining mechanism, called “proof-of-work,” ensures the validity and integrity of transactions without the need to rely on a central authority such as Visa or PayPal, who process and verify transactions and maintain their internal ledgers privately and independently. It’s a core and profound foundation of the Bitcoin protocol, but relies on mammoth stores of the world’s energy.

Where is the energy consumed?

Here’s how Bitcoin’s mining mechanism creates a energy consumption problem. First, no matter how many miners are participating in the Bitcoin network, they’re all solving the same puzzle independently, which lends to a huge waste of electricity, except of course for the computer or cluster that wins the race. Also, the competitive nature of the “proof-of-work” mechanism encourages miners to allocate more resources and horsepower to take the lead, all of which increases the amount of electricity that goes into mining bitcoins. In traditional payment services such as PayPal and Visa, centralized services account for all tasks related to verifying, processing and storing transactions, which doesn’t call into play more computational power than what’s needed just to verify the transactions.

Another factor is Bitcoin’s chaotic price surge in the past year. Since climbing to around $19,000 at the end of 2017, the value of Bitcoin has dipped considerably and hovers around $7,500 at the time of this writing. But it’s still a lot more than it was at the same time last year (under $1,000). Every new block is worth around $90,000, which encourages miners to spend more money on hardware and electricity to increase their mining energy.

What’s the fix to Bitcoin’s electricity problem?

The Bitcoin community has not been sitting on its hands and is working to shake off its electricity problem as it has done with its past troubles. Here are some of the solutions that might address Bitcoin’s insane energy consumption.


One of the most touted updates to Bitcoin might be the “proof-of-stake” consensus mechanism. In a nutshell, PoS, which is slated to substitute the power-hungry “proof-of-work” technique, removes the dependency on computing power and transfers the authority of mining or validating blocks to the persons or nodes that hold coins. PoS is much less power-consuming because mining energy will not be determined by the amount of CPU cycles miners can burn but by the amount of bitcoins they hold. For instance, a miner who owns 3% of the bitcoins available can theoretically mine only 3% of the blocks.

The reasoning behind the proof-of-stake mechanism is that people with more coins have more to lose if the network loses its integrity, and therefore they are more likely to make honest decisions. In other words, the more coins a person has, the more “stake” they have in preserving the integrity of the entire network, and therefore they are entitled to greater mining and validation power. While PoS is a very appealing fix, implementing it faces its own set of challenges, and there’s still no definite date or plan for transitioning Bitcoin to PoS. The current consensus mechanism has become a lucrative business model for mining companies. Any Bitcoin fork that relies on the PoS will need the backing of miners, but mining companies will not appreciate an overhaul that will upend their current business, and it’s not clear how many will move to the new PoS-based update when it comes.

Reward reduction

In 2020, the Bitcoin mining reward will reduce from 12.5 to 6.25 BTC, and in 2024, it will further drop to 3.125 BTC. The reward decline will make Bitcoin mining less profitable and force miners to reduce the amount of computing power—and by extension electricity—that they pour into the practice. A solution would be to shrink the per-block reward sooner than 2020, but that would probably not bode well with mining companies.

Another possible solution is to increase the size of each block on the blockchain to contain more transactions. The Bitcoin network will create a new block every ten minutes regardless of how much computing power exists on the network. It will also reward the same fixed amount of bitcoins regardless of the number of transactions contained in each block. While more transactions won’t change the computing required for mining, it could possibly protect the network’s electricity consumption from increasing as Bitcoin continues to grow in popularity and usage.

Where to from here?

A serious challenge that Bitcoin faces is satisfying its different stakeholders. The Bitcoin community consists of miners, developers and users. Every new fork will have to gain the consent and support of a considerable number of them to gain traction. Without a network of active developers, miners and users, a cryptocurrency is as good as dead.

Given their unparalleled interests and goals, bringing all the involved parties on the same page will be difficult indeed. But that’s what makes Bitcoin democratic and decentralized in the first place: no one can unilaterally make decisions for everyone. Eventually, a solution will have to emerge that will be most beneficial to the Bitcoin community as a whole. What will that solution be? Time will tell.