The problem of electricity consumption in Bitcoin and other cryptocurrencies has always plagued the ecosystem.
It has been widely reported that the bitcoin mining network now consumes more electricity than 159 countries of the world. The huge energy consumption is down to the way bitcoin and other cryptocurrencies operate. In order to avoid fraud, there is no centralized authority validating transactions. Instead, they are validated by miners who process blocks of cryptocurrency transactions in return for a reward in the form of coins. Processing the blocks involves solving difficult computational problems which can only be undertaken by powerful computing systems. And of course, the more powerful a computing system, the more energy it will use.
Digiconomist is a platform that provides in-depth analysis, opinions, and discussions with regard to Bitcoin and other cryptocurrencies, run on a voluntary, best effort basis. They had earlier put together a similar list for the Bitcoin Energy Consumption Index, which tracks the energy consumption of the digital currency. Now they did the same for Ethereum.
45.4 KWh per unique transaction (powers 1 US household for 1.5 days) #MakeEthereumSustainable
— Digiconomist (@DigiEconomist) February 11, 2019
Ethereum has plans to change its proof-of-work algorithm to an energy efficient proof-of-stake algorithm called Casper. This change would minimize energy consumption and will be implemented gradually according to the latest roadmap. For now, Ethereum is still running on proof-of-work completely.
The following steps are followed in order to estimate the network’s total electricity consumption:
- First, the total mining revenues are calculated and converted to USD.
- Then it is estimated what part of mining revenues are being spent on electricity costs.
- Lastly, the resulting number is easily converted to kilowatt-hours by dividing it by the average price per kilowatt-hour.
Since Bitcoin and Ethereum are by far the largest proof-of-work based coins it is also worth considering their combined ranking.
Like Ethereum, Bitcoin could potentially switch to such a 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.