Bitcoin, the most popular cryptocurrency in the world, consumes an incredible amount of electricity. But, its energy use depends on a lot of things.
The BTC price has suffered a major collapse this entire month, and it has remained so low it is reducing the blockchain’s vast electricity consumption.
An estimate of annualized electricity usage published on Digiconomist.net by a digital currency economist based in Paris suggests that Bitcoin’s energy demand declined by more than a third during the past several weeks.
Nevertheless, this is equivalent to Argentina’s annual electricity consumption, with a conventional Bitcoin transaction consuming the energy equivalent to what an American home would use in roughly two months.
Bitcoin: The Power-Hungry Business
The process of minting a single unit of Bitcoin has upset environmentalists and consumer advocates worried about pollution. It consumes more electricity than Finland consumes in an entire year.
Among the recent contentions over what and who crypto currencies are useful for, energy consumption has become the most recent source of contention as digital currencies, and Bitcoin in particular, have grown in popularity.
Since three weeks ago, the token’s energy consumption appears to have decreased significantly. According to the Cambridge Bitcoin Electricity Consumption Index, the network is now using a quarter less electricity than it was at the beginning of June.
Compared to Ethereum, the decline in electricity requires has been even more dramatic, falling from 94 TWh a year to 46 TWh – Qatar’s annualized use.
Bitcoin’s current electricity consumption is around 10.65 gigawatts, per the Cambridge BEC Index. This is less than the estimate of 14.34 gigawatts from the first week of June.
Its proof of work (PoW) consensus method is the primary source of the crypto’s energy usage. The process incentivizes crypto “miners” to consume electricity as they compete to create the next Bitcoin block. The winner receives a set amount of Bitcoin.
The BTC Price & Mining Incentive Correlation
In parallel with the decline in the price of cryptocurrencies (BTC reached an all-time high of $69,000 in November 2021 and is now trading near $21,000 on Friday afternoon), so has the value of the incentives to miners.
According to Digiconomist, the Bitcoin network is responsible for approximately 114 million tons of carbon dioxide per year, based on the geographical distribution of the mining hash rate and using data through May 27, 2022.
With the same statistics, Ethereum mining is estimated to create 48.7 million tons of carbon dioxide emissions, the same amount as Bulgaria.
As long as Bitcoin’s price fluctuates, its energy consumption is likely to remain variable in the foreseeable future.