Recently, the energy consumption of Bitcoin mining has also prompted some high-profile criticisms, including the US Treasury Secretary, Janet Yellen. The economic adviser of President Biden described Bitcoin as “an extremely inefficient way of trading” and stated that “the energy consumed by Bitcoin transactions is huge.”
It is not clear how much energy Bitcoin consumes, because cryptocurrencies are difficult to track by design. However, it is certain that the “mines” that conduct Bitcoin mining consume a lot of electricity.
A piece of data shows that the total annual energy consumption of Bitcoin is between 40 and 445 terawatt-hours (TWh, 1 terawatt-hour is 100 million kilowatt-hours of electricity), and the median estimate is about 130 terawatt-hours. In the United Kingdom, the annual electricity consumption is slightly more than 300 TWh, while the annual electricity consumption in Argentina is roughly equivalent to the Centre for Alternative Finance’s (CCAF) median estimate of Bitcoin.
Most of the electricity used in Bitcoin mining comes from pollution. The blockchain technology that supports cryptocurrency requires powerful computing power in design, which means a huge amount of energy consumption.
“Mining” relies on a huge and decentralized computer network. The computer equipment used for “mining” is called the “mining machine”, and people engaged in the Bitcoin mining are called “miners”. They can create new bitcoins, and independently verify and record every Bitcoin transaction.
In fact, Bitcoin is the reward that miners keep accurate records of every transaction. Gina Pieters, the professor of economics at the University of Chicago and a researcher on the CCAF research team, explained that this is like a lottery every 10 minutes. Data processing centers around the world compete to compile and submit transaction records in a systematically acceptable way, and they must also guess a number at random. The first person to submit the transaction record and accurate numbers will win the prize. This will become the next block of the blockchain. At this point, they will be rewarded with 6 and 1/4 bitcoins, each worth about $50,000. After the draw ends, a new number will be generated and the entire process will start again.
Professor Pieters stated that the higher the price of Bitcoin, the more miners will want to participate. “They want to make money,” she said. “This will encourage them to bring in more powerful machines to guess this random number, thereby increasing energy consumption.”
In addition, there is another factor that drives the continuous increase in the Bitcoin’s energy consumption. Since the program is designed to ensure that it always takes 10 minutes to understand the puzzle, if the number of miners increases, the puzzle will become more difficult and require more computing power.
In fact, Bitcoin is designed to encourage more computational work. The philosophy of Bitcoin is that the more computers competing to maintain the blockchain, the safer the blockchain will become, because anyone who may try to destroy this virtual currency must be at least equivalent to the sum of the computing power of other miners
This means that as the value of Bitcoin gets higher, the calculation work used to verify and maintain it, as well as the energy consumed by it, will inevitably increase. Different from the Variable Delayed Proof of Stake (VDPoS) adopted by the MUSO blockchain, the NGK blockchain adopts the DPOSS consensus algorithm. It combines the advantages of POS+POC+POST, which is a fast, safe, and relatively low energy consumption consensus mechanism, making NGK an efficient and decentralized system. Therefore, the NGK is considered as the blockchain 3.0.