Crypto Mining and Energy Use

Why proof-of-work mining uses so much electricity, how Ethereum cut its energy use, and the environmental debate around cryptocurrency.

Bitcoin and some other cryptocurrencies are secured by proof-of-work mining, which uses enormous amounts of electricity.

Why mining uses energy

Miners compete to solve computing puzzles by making trillions of guesses per second with specialised machines. The first to find a valid answer adds the next block and earns the reward. The harder miners compete, the more electricity they use. The system is designed so that attacking it would require controlling a huge share of the network’s computing power, making attacks very costly.

How much energy?

The Cambridge Centre for Alternative Finance has estimated that Bitcoin mining uses electricity comparable to that of a medium-sized country, on the order of 100 terawatt-hours or more per year, well over half a percent of global electricity use.

Environmental concerns

Emissions: when mining uses electricity from coal or gas, it adds to greenhouse gas emissions.
Electronic waste: specialised mining machines become obsolete quickly.
Local strain: large mining operations can strain local power grids.

Supporters argue that miners increasingly use renewable energy and surplus power that would otherwise be wasted, such as from remote hydropower or flared gas at oil fields, and can help balance grids by switching off during peak demand.

Ethereum’s switch

In September 2022, Ethereum, the second-largest cryptocurrency, completed an upgrade called the Merge, switching from proof of work to proof of stake. The Ethereum Foundation estimated this cut Ethereum’s energy use by over 99.9 percent.

China’s ban

China, once home to most Bitcoin mining, banned crypto mining in 2021. Mining shifted to countries like the United States and Kazakhstan.

The miner's calculation

A mining company compares the value of bitcoins it expects to earn with the cost of electricity and machines. When Bitcoin's price is high, mining is profitable even with expensive power. When the price falls, miners with high electricity costs shut down. Mining activity therefore tends to move to places with the cheapest electricity.

Thinking all cryptocurrencies use huge amounts of energy

Energy use depends on the consensus mechanism. Proof-of-work systems like Bitcoin use a lot; proof-of-stake systems like Ethereum after 2022 use a tiny fraction.

Key takeaways

Proof-of-work mining uses large amounts of electricity to secure the network.
Bitcoin's electricity use is comparable to a medium-sized country.
Ethereum's 2022 switch to proof of stake cut its energy use by over 99.9 percent.
China banned mining in 2021, shifting it to other countries.