Bitcoin’s energy hunger has received wide attention in the global media as well as in the academic literature. Bitcoin is a digital currency based on a cryptographically secured distributed ledger and represents the first and best-known blockchain application. Its computationally intensive ‘mining’ process requires vast amounts of electricity to validate ownership and transactions. With Bitcoin’s transition from geek-money to mainstream, its energy demand and concerns about its environmental sustainability have grown alike. And yet, most studies and criticisms have focused exclusively on Bitcoin and thereby ignored that more than 500 further mineable coins and tokens exist.
In the study, published in the scientific journal Joule on August 4, 2020, an interdisciplinary research team of the Technical University of Munich (TUM) and the Massachusetts Institute of Technology (MIT) analyzed cryptocurrencies with ‘proof-of-work’ algorithms, which account for more than 98% of the total market capitalization. Based on the underlying algorithms, current hash-rates, and suitable mining devices, the authors conclude that Bitcoin accounts for two thirds of the total energy consumption of all cryptocurrencies. Further mineable coins and tokens represent the remaining one third, and therefore, add 50% on top of Bitcoin’s energy hunger. This additional energy demand of 17 TWh per annum equals the current consumption by the nation of Jordan. Combined with Bitcoin, the annual energy demand of cryptocurrencies sums up to 55 TWh – a level which sits between the consumption by the nations of Israel and Bangladesh.
“The energy consumption of cryptocurrencies is a good example that highlights the need to decarbonize the electricity sector. With rapidly processing digitalization in all areas of the economy, we need to switch to clean energy sources such as wind and solar PV rather sooner than later. If we achieve this transition, we may maintain or even increase our energy consumption without causing further global warming. Green stimulus in the wake of the Covid-19 pandemic recovery may help to accelerate this vital transition”, says Christian Stoll, co-author of the study, conclusively.
About the Authors
Ulrich Gallersdörfer, is a researcher at the Chair for Software Engineering for Business Information Systems at the Technical University of Munich. Lena Klaaßen was a visiting researcher at MIT this spring, and is now completing her master’s degree at TUM School of Management. Christian Stoll is conducts research at the MIT Center for Energy and Environmental Policy Research and the TUM Center for Energy Markets of the TUM School of Management.