When the enigmatic Satoshi Nakamoto minted the world’s first cryptocurrency in 2009, the plan was to create a decentralized payment's platform that would revolutionize how we buy and sell everything.

The point of Bitcoin, according to Nakamoto’s founding white paper, was to enable quick, borderless transactions.

More than a decade on, it’s undeniable that Bitcoin has gone mainstream, but perhaps not in quite the way Nakamoto imagined. Instead of facilitating everyday transactions, cryptocurrencies have by and large become speculative assets, a sort of digital gold, attracting investors who believe they’ll be able to resell their holdings for big profits in the future.

The digital gold rush has come with a catch: Massive electricity consumption.

It’s estimated that Bitcoin consumes electricity at an annualized rate of 127 terawatt-hours (TWh). That usage exceeds the entire annual electricity consumption of Norway. In fact, Bitcoin uses 707 kilowatt-hours (kWh) of electricity per transaction, which is 11 times that of Ethereum.

Of course, Bitcoin isn’t unique among cryptocurrencies in terms of its environmental burden, but its popularity and uniquely inefficient consensus mechanism make it an easy scapegoat. Meanwhile, the blockchain technology that underlies it could be the key to a greener future. 

Why Does Bitcoin Consume So Much Energy?

Conceptually, it doesn’t seem like Bitcoin should require enormous amounts of electricity. All you have to do is point and click or tap on your smartphone to buy and sell the cryptocurrency. We’ve had technology that does much the same for other sorts of digital transactions for decades.

But it’s Bitcoin’s decentralized structure that drives its huge carbon emissions footprint.

To verify transactions, Bitcoin requires computers to solve ever more complex math problems. This proof of work consensus mechanism is drastically more energy-intensive than many people realize.

“In the case of Bitcoin, this is done by having many different competitors all conduct a race to see how quickly they can package the transactions and solve a small mathematical problem,” says Paul Brody, global blockchain leader at EY.

The miner who completes the mathematical equation the fastest not only certifies the transaction but also gets a small reward for their trouble in the form of a Bitcoin payment.

In Bitcoin’s early days, this process didn’t consume more electricity than some countries. But inherent to the cryptocurrency’s technology is for the math puzzles to become much, much harder as more people compete to solve them—and this dynamic will only accelerate as more people attempt to buy into Bitcoin.

Multiple miners are using electricity in competition for rewards. Even though there may be hundreds of thousands of computers racing to solve the same problem, only one can ultimately receive the Bitcoin honorarium.

“Of course, this is wasteful in the sense that 99.99% of all the machines that did work just throw away the result since they didn’t win the race,” says Brody. While this process produces a fair and secure result, it also creates a ton of carbon emissions. “I very much doubt [whoever founded] Bitcoin anticipated such enormous success in the future and, consequently, the enormous amounts of power we’re talking about,” Brody says.

This process also takes an immense amount of time: Upwards of 10 minutes per Bitcoin transaction. That’s the time it takes for a new block to be mined.

Other digital transactions, like those powered by Visa, are faster and rely on less energy. Visa, for instance, can handle around 1,700 transactions per second (TPS) compared with Bitcoin’s 4 TPS.

In terms of crypto mining, the U.S. holds the lion’s share of the global Bitcoin mining market, with nearly 38% of global hashrate recovery—meaning lots of blockchain computations—according to May 2022 report from the Cambridge Digital Assets Program (CDAP).

CDAP also found that China is the second biggest Bitcoin mining hub, despite Beijing’s crackdown to eliminate Bitcoin mining within its borders, with more than 20% of the global market share.

Other Bitcoin mining hubs include Kazakhstan with a 13% global share, Canada at more than 6% and Russia at nearly 5%, with the rest scattered across the globe.