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Rachel Welch

23 November 2022 83 Read Bitcoin

How Much Electricity Does Bitcoin Mining Use?

Earlier this year, an analyst at a crypto firm estimated that Bitcoin mining consumes four terawatt hours (TWh) of electricity annually. This may seem like an exaggeration, but it is a fairly accurate figure. Compared to the other industrialized financial systems, the power consumption of the global Bitcoin economy is comparable.

There are several ways to estimate the amount of energy used by the industry. Some estimates rely on a metric based on a tea kettle that runs for a long time. Others use a more scientific approach to calculate the energy a particular technology uses. These estimates vary based on the methodology used and the timing of the calculations. Some claim that the most accurate estimates are a little overstated.

The University of Cambridge estimates that Bitcoin mining uses nearly as much energy as all of global copper mining. In addition, the company estimates that if it were its own country, the industry would rank 27th in energy consumption.

The most efficient Bitcoin network could be powered by a single large power plant that would produce enough electricity to run the world's entire financial system for four days. This estimate has a caveat: electricity is a finite resource. It also depends on the number of miners in the network. As the number of miners increases, energy usage increases.

In addition to mining, the system also requires a considerable amount of energy for other purposes. The proof of work consensus mechanism is a particularly energy-intensive process. Moreover, printing paper notes also requires 11KWh of energy per year. Some mining operations in China have even used hydropower during the rainy season to cut down on carbon emissions.

Several estimates have been produced, but the University of Cambridge's is the only reputable one. The study argues that while the number of coins is only about seven, the number of Bitcoin transactions a given miner can accomplish in a single day is about 231,726,027 kilowatt hours. That's more than the total output of 23 coal-fired power plants in the United States during the same period. That's not to mention the numerous other mining applications spanning the globe.

While the University of Cambridge estimate is the sexiest, it may not be the most accurate. According to the study, the real world cost of a single Bitcoin transaction is between 175 and 340 kilowatt hours, and the price of electricity for that transaction is around $9. The same dollar amount would purchase about eight pounds of tea, enough to power an American household for a six-week period.

The University of Cambridge estimates that the number of transactions that a single coin can accomplish is the same number as the number of tea kettles that run in England for about 26 years. If these figures are indeed true, then the bitcoin might just be the largest single source of carbon emissions in the world.

A study from MoneySuperMarket shows that the cost of a single Bitcoin transaction is comparable to the electricity consumed by the average American household for six weeks. The study uses a standardized cost of nine cents per kilowatt hour worldwide for a twelve-month period to estimate the true cost of a transaction.