Happy Thursday, Luxor mining crew!
Today, we’re going to be talking about everyone’s (favorite) least favorite Bitcoin talking point: Bitcoin mining’s energy appetite.
As Bitcoin’s network has grown, so too have concern over its carbon footprint, and this concern is particularly pronounced in North America. The region inherited the bulk of China’s mining industry following the CCP’s mining ban, so folks are increasingly grappling with the industry as it migrates to American and Canadian shores. (You only need to consult Elizabeth Warren’s growing litany of anti-PoW soundbites and tweets to see how quickly the conversation has picked up).
Sponsored by BlockFi
Before we go any further, we shouldn’t apologize for Bitcoin’s energy consumption. How often, afterall, do people stop to question the energy consumption of HVAC, clothes dryers, video streaming/gaming, and other modern conveniences? If these are spared from scrutiny, certainly Bitcoin–a permissionless, global monetary system that tens of millions of people use everyday as a tool for financial preservation–should be exempt from criticism too, right?
To some of us, the answer is of course yes, but others don’t believe the energy use is justified. These people will likely not see any of Bitcoin’s energy use as justified, no matter how small in comparison to other trimmings of the 21st century. Indeed, a single gigawatt is too much energy allocation for bitcoin to some of these critics.
Still, it’s worthwhile to model Bitcoin’s energy use, both for the sake of the argument and our own edification.
How Much Energy Does Bitcoin Mining Consume?
Now to the meat of this newsletter. How much energy does Bitcoin mining consume, anyway?
The long-short, nobody knows the exact figure. But we can loosely extrapolate the number by looking at some combination of network hashrate, hardware specs, and proprietary information from mining companies.
A handful of reports and researchers have addressed the question within the last year, most notably, the University of Cambridge’s Centre for Alternative Finance, the Bitcoin Mining Council, Coinshares, and NYDIG/Nic Carter. Taken together, the estimates give us a pretty large ballpark to play in (the highest estimate in the bunch, for example, is more than double the lowest estimate), but the models provide the most comprehensive look into Bitcoin energy consumption and carbon footprint to date.
Below are the estimates for Bitcoin’s 2021 energy use and this usage’s share of global energy consumption.
To put this energy use into perspective, Bitcoin mining uses less energy than consumer electronics (TVs, laptops, video games, smart phones, etc) in the US alone. It also uses less energy than the world’s datacenters and the global banking industry.
Looking at Bitcoin’s energy consumption in relation to other goods/services/industries is intuitive even if somewhat illogical. To quote Satoshi Nakamoto, “There's nothing to relate it to, so any side-by-side comparison will end up short (the only analog industries that come close are banking and datacenters). Comparing the energy use of bitcoin and consumer electronics is like comparing the energy use of the internet and dirtbikes–they serve completely different function. Comparing bitcoin to ACs makes even less sense.
But many consumer electronics (and AC) are luxuries, so the comparisons are worthwhile if only to pose the question, “why do these luxuries deserve such outsized power use?”
Most folks who indulge in these luxuries would say, "because they are useful to me." Precisely. Energy allocation, like value, is subjective and highly contingent on personal experience and preferences. Those who moralize Bitcoin's energy use and call on it to be curtailed probably find no need to apologize for the energy they spend on streaming or tweeting or video gaming or whatever else.
And they shouldn't have to--that's the point. But lest they be hypocrites, they should hold their tongues from critiquing someone else's energy use just because they don't find utility in it.
Have a great week, and happy hashing!
Hashrate Index Newsletter
Join the newsletter to receive the latest updates in your inbox.