Why Proof of Stake Is The Future — Part 1:
Bitcoin Energy Consumption
Bitcoin — the world’s first cryptocurrency — famously used the proof of work algorithm. This was a state of the art feature that was ahead of its time when it was first rolled out in 2009. Proof of work (PoW) is a mechanism by which the nodes processing the blockchain reach agreement (or consensus). This is a critical function for the blockchain, and without it the chain would be susceptible to attacks.
The PoW method maintains the integrity of the blockchain through the solving of complex computer algorithms. The “work” done is representative of the amount of computing power used to solve these algorithms. The sum of all of the work being done on the network at any given time is called the “hash-rate.” In order to receive higher mining rewards, there has been an arms race for increased hash power for mining rigs. And with this increased hash rate comes a cost: higher energy usage.
Digicomist keeps an up-to-date index on Bitcoin’s energy consumption, which is on pace to consume a whopping 73.12 Terra-Watt hours of power in 2019. This is a higher amount of electricity than what is used in the entire country of Austria in one year.
The carbon footprint and massive cost of maintaining the network at this hashrate is another factor that must be considered. The Bitcoin blockchain alone has the carbon footprint equivalent to the nation of Denmark. And calculating the cost of running this network with an average global electricity cost of $.14/kWh, the 73.12 TWh of electricity use costs an incredible $10.24 Billion per year.
Consider this: the electricity consumption for the entire world in 2018 was about 22,500 Twh. This means that the bitcoin network’s energy consumption alone was about ⅓ of 1 percent of the global supply. While it may not seem like much on a global scale, the effect is significant. These numbers are already staggering and they are projected to continue growing. In the past two years, the energy consumption has risen 450%, and will likely continue to rise with Bitcoin’s upcoming block reward halving.
The above numbers are only representative of the Bitcoin blockchain. If you add Ethereum to the mix, you add another 10 Twh of electricity consumption to the total, and so on. While these two account for the majority, the overall effect is disastrous for the environment. The amount of pollution produced is 35,000 kt of CO2 (that’s 35,000,000 metric tons).
It’s no secret that Bitcoin is in the public eye, and has caught the attention of regulators globally, who are seeking to find ways to control the decentralized currency. As countries are simultaneously clamping down on environmental restrictions, Bitcoin’s rapidly growing environmental impact will not be viewed positively. If Cryptocurrency is going to finally achieve the “mass adoption” that everyone dreams of, it must move away from the Proof of Work model. While it was a great start to blockchain, it has become unsustainable and the industry needs to evolve away from “work” and move to a more eco-friendly “stake” method of consensus.