Value of Bitcoin
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Value of Bitcoin

Bitcoin’s energy consumption is a necessity and might have a positive impact on the environment

Photo by Karsten Würth (@inf1783) on Unsplash

Bitcoin’s proof-of-work consensus mechanism and its relation to energy consumption

Work is energy directed to a certain action and energy is “work done,” as stated by the French Mathematician Gaspard-Gustave de Coriolis. The work done can be stored in money such as bitcoin for future expenses. The Bitcoin consensus mechanism is based on proof of work in which energy is used to keep the blockchain running securely.

  1. The energy consumption for keeping the Bitcoin blockchain running is determined by the hashrate of the network and each miner’s energy consumption.
  2. The bitcoin reward is predetermined by the protocol.
  3. The overall cost-efficient mining power is defined by the market (bitcoin reward per block and bitcoin price).

Bitcoin’s energy consumption in the future

The future energy consumption depends on the number of miners and each miner’s energy efficiency.

taken from bitinfocharts

Why proof of work is a necessity

“Energy expenditure is a key to the safety and security of the network, allowing it to maintain an honest record of transactions and a predetermined fixed credible monetary policy.”

  1. The network only accepts non-fraudulent blocks which incentivizes miners to act honestly. In the event a miner acts fraudulently and proposes a block that does not fit the criteria, the mined block will be discarded by the network.
  2. Miners need to sell some of their mined bitcoins to finance their operational costs. This ensures a proper distribution and usage of bitcoins.
  1. costs imposed on society by different political factions attempting to gain control of the printing press,
  2. costs imposed by special-interest groups who persuade controllers of the printing press to misuse their authority (print more money) for the benefit of special interests,
  3. inflation-induced misallocations of resources as a result of misused monetary authority, and
  4. costs incurred by businessmen in their attempts to predict what the monetary authority will do in future.

Why Bitcoin’s proof of work has a positive impact on the environment

A huge portion of energy consumed by Bitcoin mining already originates from renewable energy sources. A recent study conducted by Coinshares concludes that renewable energy makes up 78% of total Bitcoin mining energy use, while another recent study from the Cambridge Centre for Alternative Finance concludes a conservative overall ~28% use of renewable energy.

Taken from Rauchs, Blandin, Klein, Pieters, Recanatini, Zhang (2018)
by Trent McConaghy
Photo by Jason Blackeye on Unsplash


“[…] bitcoin is providing a powerful market incentive to energy producers worldwide to increase their energy production. […] By giving a large financial incentive to anyone able to mine at an electricity cost below that of the market, Bitcoin makes the development of cheap sources of electricity, anywhere in the world, very rewarding.”



VoB is a dialogue platform for professionals bringing together researchers, investors, bankers, regulators and journalists to debate the most fundamental questions around the value of Bitcoin. Events:

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Daniel Wingen

Initiator of BlockKeeper, German Bitcoin educator, monetary theory, economics, token engineering and decentralization