The vast amount of energy that cryptocurrencies use has long been a point of contention between enthusiasts and critics. It’s no secret that blockchain activity, from mining coins to conducting transactions, is far from eco-friendly. Some cryptos now use more electricity than entire cities or even countries.
The two biggest players in the crypto game, Bitcoin and Ethereum, are both guilty of this. But which requires more energy, and is either one doing anything to improve?
The Energy Requirements of Bitcoin
Bitcoin (BTC) has been the subject of considerable criticism for its mammoth energy requirements. Crypto, by nature, is not an eco-friendly industry. The sheer popularity of Bitcoin has given way to increasing electricity needs by many different parties. Before we get to the real meat of Bitcoin’s energy problem, let’s start with one of its most simple functions: buying and selling.
In October 2021, statistics site Statista conducted a study on how much electricity one Bitcoin transaction uses. They compared it to Visa, another popular digital payment method. The results were pretty shocking and very worrying.
The study found that just one Bitcoin transaction uses around 12 times as much electricity as 100,000 Visa transactions. Around 400,000 Bitcoin transactions take place every day so, every 24 hours, transactions alone use 7,000 MWh of electricity.
To put this into perspective, consider the energy consumption of an electric car. A standard electric car consumes around 0.20 kWh per kilometer. So, an electric car would have to travel 35 million kilometers (22 million miles) to use as much electricity as all daily Bitcoin transactions do. Yes, you read that right. But it doesn’t end with transactions. Simply finding Bitcoin and putting them into circulation also racks up quite an electricity bill.
The Energy Requirements of Bitcoin Mining
Mining is the process of finding and circulating new crypto coins. You’ve probably heard of this if you’re interested in crypto, or maybe you’ve seen it in news headlines. Mining requires unbelievable amounts of energy and is contributing to climate change.
Let’s take a look at the data here. Currently, users mine around 144 Bitcoin blocks daily, which comes to just over 50,000 annually.
This mining process uses up 91 TWh of electricity each year. This may sound like a small amount, but one terawatt-hour contains one million megawatt-hours. So, in short, Bitcoin mining is using a lot more energy than the total annual transactions conducted. It’s the most energy-intensive part of the cryptocurrency industry, without a doubt.
Let’s take a look at another of Statista‘s studies to better understand the energy consumption of Bitcoin as a whole.
The chart above shows that Bitcoin is now using 177.43 TWh of electricity on an annual basis. Mining takes up around half of this figure, with storage, transactions, and other elements making up for the rest. So, Bitcoin is clearly taking up a huge amount of energy, but how does it compare to Ethereum, the world’s second most popular cryptocurrency?
The Energy Requirements of Ethereum
Ethereum (ETH) is a hugely popular cryptocurrency, with a current market cap of almost $530 billion. Its popularity and value have soared, but increased demand means increased energy requirements. So, let’s take a look at Ethereum transactions first.
Statista‘s data shows that, like Bitcoin, one Ethereum transaction uses more energy than 100,000 Visa transactions. This is still a shocking fact, but the energy difference between the two isn’t as drastic as what we see with Bitcoin. Ethereum uses 1.2 times the energy needed for 100,000 Visa transactions. But recall that Bitcoin requires over 12 times the energy for just one transaction. So, there is a drastic difference in energy usage here.
But this doesn’t address the core environmental problem with cryptocurrency: mining. So, let’s see how Ethereum compares to Bitcoin in this case.
The Energy Requirements of Ethereum Mining
Currently, Ethereum mining uses up around 44.5 TWh of energy every year, which comes in at just half that of Bitcoin. Of course, this is still a huge amount of energy. But when discussing these figures, it’s important to consider how many BTC and ETH have been mined so far.
There are currently just under 19 million BTC and almost 120 million ETH in circulation right now. So, around six times more Ethereum has been mined than Bitcoin, all the while using significantly less electricity.
Now, let’s get back to the original question: which crypto uses more power, Bitcoin or Ethereum? When looking at the figures, the very obvious answer is Bitcoin by a long shot. Both its transactions and mining process use significantly more electricity than Ethereum. Statista’s reports on the total amount of energy used by both cryptos confirm this.
As previously discussed, Bitcoin is currently using around 177.43 TWh of electricity yearly. Ethereum uses around 79.69 TWh yearly. Again, we see that Bitcoin’s energy requirements tower over that of Ethereum. So, in short, Bitcoin is certainly the more energy-intensive cryptocurrency.
What’s more, Ethereum has now updated its blockchain so that it requires even less energy. This new blockchain is ETH 2.0.
What’s Ethereum 2.0 All About?
The ETH 2.0 upgrade, also termed “Serenity”, aims to provide a more efficient and eco-friendly blockchain. This upgrade has resulted in several differences. One of these is Ethereum’s transition from the Proof of Work to the Proof of Stake mechanism. These are essentially consensus protocols that keep blockchains safe and secure.
There are a few differences between these two mechanisms, but the difference in energy efficiency is what really matters. The Proof of Stake mechanism is considerably more energy-efficient than the Proof of Work mechanism. This is why Ethereum, and some other blockchains, are now making the switch.
Among other things, ETH 2.0 is also a lot more scalable than its predecessor, which is great news for the blockchain’s continued growth. So, in a nutshell, ETH 2.0 will decrease the blockchain’s energy requirements significantly. This is great news for the environment and people’s wallets.
The Energy Consumption of Crypto Is Still a Problem, but Things Are Evolving
While the cryptocurrency industry still uses absurd amounts of energy, this problem is being addressed. You can now invest in cryptos like IOTA or Stellar that are kinder on our climate. By doing so, you’ll ensure that your involvement in the cryptocurrency industry doesn’t do the planet too much damage. Though the crypto world still has a way to go before it can call itself eco-friendly, it’s exciting to see developers make the environment a priority.
Confused about Bitcoin and cryptocoins? Wondering what all the fuss is about? We explain what Bitcoin is and how to spend it.
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