Bitcoin estimated to use half a percent of the world's electric energy by end of 2018

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Bitcoin's burgeoning electricity demands have attracted almost as much attention as the cryptocurrency's wildly fluctuating value. But estimating exactly how much electricity the Bitcoin network uses, necessary for understanding its impact and implementing policy, remains a challenge. In the first rigorously peer-reviewed article quantifying Bitcoin's energy requirements, a Commentary appearing May 16 in the journal Joule, financial economist and blockchain specialist Alex de Vries uses a new methodology to pinpoint where Bitcoin's electric energy consumption is headed and how soon it might get there.

"We've seen a lot of back-of-the-envelope calculations, but we need more scientific discussion on where this network is headed. Right now, the information available is pretty poor quality overall, so I'm hoping that people will use this paper as a foundation for more research," says de Vries, who works at the Experience Center of PwC in the Netherlands and is the founder of Digiconomist (@DigiEconomist), a blog that aims to better inform cryptocurrency users.

His estimates, based in economics, put the minimum current usage of the Bitcoin network at 2.55 gigawatts, which means it uses almost as much as Ireland. A single transaction uses as much electricity as an average household in the Netherlands uses in a month. By the end of this year, he predicts the network could be using as much as 7.7 gigawatts—as much as Austria and half of a percent of the world's total consumption. "To me, half a percent is already quite shocking. It's an extreme difference compared to the regular financial system, and this increasing electricity demand is definitely not going to help us reach our climate goals," he says. If the price of Bitcoin continues to increase the way some experts have predicted, de Vries believes the network could someday consume 5% of the world's electricity. "That would be quite bad."

Bitcoin is dependent on computers that time-stamp transactions into an ongoing chain to prevent duplicate spending of coins. Computers in the network perform calculations continuously, competing for the chance, once every ten minutes, to be appointed to create the next block of transactions in the chain. The user of the computer that wins is awarded 12.5 new coins—a process known as "mining" Bitcoin. But all the time, even the users that don't win are expending computing power. "You are generating numbers the whole time and the machines you're using for that use electricity. But if you want to get a bigger slice of the pie, you need to increase your computing power. So there's a big incentive for people to increase how much they're spending on electricity and on machines," de Vries says.

It's figuring out when that incentive stops paying off that is at the heart of de Vries's estimation method. Economic principles suggest that the entire Bitcoin network will eventually reach an equilibrium where the costs of the hardware and electricity used to mine equal the value of the Bitcoin being mined. And that information can approximate the total amount of electricity that the network will use at said equilibrium.

Other researchers have used the fundamentals of this method before, but de Vries goes farther. He uses production information about Bitmain, the biggest manufacturer of Bitcoin mining machines, to estimate both how much of a miner's costs are associated with hardware rather than electricity and when this equilibrium might be reached. And while he does have confidence in his estimates, the problem with this method is that these manufacturers are extremely secretive. "Sometimes the best information we've got is really shaky eyewitness accounts. That's the stuff we have to work with," he says.

Still, he believes that getting a good estimate is important in determining the sustainability of cryptocurrencies moving forward and in helping shape policy around them. Some states in the U.S. have already started to put restrictions around Bitcoin mining. "But you need to base your policy on something. And I think that my method is important in that regard, because it's very forward-looking. It's focused not on the now, but on where we're headed. And I think that's something you really need to know if you're going to draft policy about it," he says.

He also points out that there is plenty of room for discussion of his method. "I think everyone agrees on the minimum energy consumption. But the future estimate? That's actually quite debatable. We don't really have a common approach to getting to a future estimate of electricity consumption right now, which is why I am hoping to get this conversation started. I'm doing this research, but a lot of people should be doing it."

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More information: Joule, de Vries: "Bitcoin's Growing Energy Problem"
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May 16, 2018
Time for the world's nations to come together and ban Bitcoin forever.

May 16, 2018
Time for the globalization of information to be accepted by the world's nations and to stop war on citizens representing potential science, but ultimately unavoidable libertarianism.

If only block chains mapped to something useful, two birds with one stone, or could be used in conjecture with distributed computing to compute something useful (meteorite tracking (perhaps the REAL common enemy of the World's Nations), (protein unfolding), ect.) Or had some kind of associative reward system, as the marginal benefit of coin harvesting falls.

If the crypto-underground were better organized(potential paradox as its power lies in being distributed) and did not copy the greed of their predecessors, they could have silence on the wire, in regards to warfare. And the future of computation, non-local.

Information is the modern commodity. What, if there is, use, the social construct decides.

May 17, 2018
I wonder if the same analysis of how much does it cost for the current financial system to do its business.

Heck why not ask how much of the worlds energy goes towards war.

If you really want to know one of the most important things that is missing in this world, accountability (honesty). Now if someone could just come up with a technology or ensure accountability.... hmmm, oh wait, there is such a technology. And what is this magical unicorn tech your talking about... its called "decentralized blockchain" aka cryptocurrencies.

How much does honesty already cost us... lawyers, judges, police officers, anyone with signing authority over anything else... and let's not forget the cost of all those people involved driving to work, the electricity those buildings use, the cost ... You know considering the above cost of current honesty what do we have, a massively corrupt system that is still trying to be justified as legitimate.

May 17, 2018
"the minimum current usage of the Bitcoin network at 2.55 gigawatts"

Don't you hate it when units get mixed up! The watt is a unit of power not current!

May 18, 2018
I agree with dbastianello. Bitcoin is the world's insurance policy against corrupted bankers and authorities. The small percentage of the world's energy use is probably worth it. Otherwise Bitcoin would disappear.

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