Bitcoin mining is an essential part of how the currency works, as miners verify transactions and add new blocks to the blockchain. It has come under attack for its high energy use. Estimates indicate Bitcoin mining uses between 73-113 terawatt-hours (TWh) of electricity per year as of 2023. This astounding figure has sparked a passionate discussion about the climate footprint of cryptocurrency. Now, many are taking a step farther, comparing cryptocurrency energy usage to entire countries. In response, proponents suggest we consider Bitcoin’s energy consumption relative to the benefits it may provide. They argue we should offset its energy usage against that of conventional financial networks.

91 TWh used annually by Bitcoin mining is a massive amount of energy. To put that in perspective, that’s more electricity than 164 countries use in an entire year. Bitcoin’s energy use is actually quite small. Despite its advantages, fossil energy generation still dominates the energy mix and renewable energy only accounts for less than 0.5% of total energy produced/consumed globally. This sobering figure provides helpful context. This infographic demonstrates that despite the massive impact that energy use has on the totality of human civilization, it accounts for only a tiny percentage of the world’s energy demand.

Following China's crackdown on cryptocurrency mining, Bitcoin mining operations have shifted to other regions, including the United States and Kazakhstan. This massive geographical move has significant implications for what energy sources are powering these mines. In other parts of the world, miners are turning to renewables in ever-growing numbers. They’re using solar, wind and hydroelectric energy to reduce their emissions. Both a push from environmental concerns and a pull from new economic opportunity motivate this transition. In the long term, renewable energy is usually the cheaper choice.

Putting Bitcoin’s energy consumption in the context of the traditional global banking system’s is a third, often overlooked, but important perspective. A 2014 academic study found that the entire existing banking infrastructure used about 660 TWh per year. That figure is over seven times the current energy use of Bitcoin mining. Further accounting for the banking system’s energy use since 2014 has certainly changed since then. This side-by-side comparison highlights just how high the energy use of the current financial system is.

Environmental concerns Aside from its impacts on energy consumption and environmental degradation, the siting of Bitcoin mining operations raises other environmental justice issues. Cold environments present a built-in benefit, where operators can use the ambient air around them to cool mining machines. This reduces the demand for expensive and energy-consuming air conditioning units. In addition, you’ll save money on electricity bills and on maintenance costs. Cooler temperatures allow hardware to run faster which results in more efficient and profitable mining operations.

In the past, Sichuan, China, was one of the largest centers of Bitcoin mining, especially during the country’s rainy season. The region’s hydroelectric power gave the miners access to a cheaper and renewable energy source. Then in September 2021, the Chinese government launched an intensified crackdown on cryptocurrency activities. Continuing the negative trend, mining operations in Sichuan and other areas of the country were left reeling. This change has driven miners to aggressively pursue new homes with cheaper energy prices and more favorable regulatory conditions.

The environmental impact of Bitcoin mining continues to be highly contested. Industry critics say that the energy use only adds insult to injury by increasing greenhouse gas emissions and amplifying climate change effects. In doing so, they call for increased regulation and a transition to more sustainable approaches to mining. Supporters want you to focus on ways that Bitcoin is accelerating innovation and investments in renewable energy. They praise its potential to boost financial inclusion. They argue that the energy consumption should be weighed against the benefits of a decentralized and secure digital currency.

Technological advancements are shifting the dynamics of Bitcoin’s energy consumption at a breakneck speed. Changing mining practices will play a big role in dictating how this energy is consumed going forward. There is increasing international leadership on developing energy-efficient mining hardware. Expanding renewable energy adoption will greatly lower the environmental impact of Bitcoin mining. Expanding the use of renewable energy will help as well. Additionally, alternative consensus mechanisms, such as Proof of Stake, offer the potential to significantly reduce the energy requirements of blockchain networks.

The discussion about Bitcoin’s energy usage is large, intricate and nuanced. Their current energy footprint is anything but small. This is a negative side effect, we need to zoom out—what are the potential benefits of this new technology? What is the energy usage of our current financial systems? Where are we making strides to improve energy efficiency and utilize alternative energy sources? The crypto industry is always changing. If we want to guarantee its long-term sustainability, we need to address the environmental issues associated with Bitcoin mining.