Electric Money
Perspectives on Bitcoin, energy, and the environment

Why Does Bitcoin Use So Much Energy?

Short answer

Bitcoin is forged from energy through a process called “Proof of Work.” This ensures bitcoin is and remains sound, fair, and honest, because it forces everyone to play by the same rules—energy cannot be printed by central banks or gamed by politicians. The expenditure of energy is the specific solution to the problem of corruptible money.

Longer answer

Every unit of energy spent on the Bitcoin network does the following:

  • Ensures everyone follows Bitcoin’s protocol (i.e., its monetary policy)
  • Fairly distributes new bitcoins.
  • Writes new transactions to the ledger (i.e., the blockchain)
  • Prevents various attacks like double-spending and denial of service.
  • Secures all previous transactions.

Bitcoin’s energy usage is never wasted. It powers the critical infrastructure for a fair, global money. It does this through “Proof of Work”, a consensus mechanism that make dishonesty prohibitively expensive and gives every bitcoin an “unforgeable costliness.”+

Proof of work is one of Bitcoin’s major technological leaps, but it may also be its least understood components. Because Bitcoin is purely digital, it seems counterintuitive that we would need it to use so much energy; you might think “why don’t we just change the code to make it more efficient?” There are two main reasons not to do that:

  • Energy links Bitcoin’s digital world to our physical world. Energy becomes Bitcoin’s physical property; this property serves a similar function to that of gold. Gold is held around the world as a store of value because it is a rare element that is difficult to extract and limited in quantity. Bitcoin extends the properties of gold into the digital realm. By design, the more energy that is used for Bitcoin the more secure, honest, and useful it becomes.
  • If we take the energy link away from Bitcoin, it loses its physical limits and ceases to be “backed” by something physical; the result would require more outside influence and trust (the very thing Bitcoin was designed to replace). There are other cryptocurrencies that provide alternatives to the usage of energy (e.g., coins that use “Proof of Stake”) which claim that they use 99% less energy. While that may be true, a major trade off+ is that they become prone to the same pitfalls we already have in our current system of fiat paper currency and central banks: those who have the money have the power+. The more money you have to “stake”, the more control you have over the system. Bitcoin’s energy use and Proof-of-Work system prevents this from happening.

Finally, consider the amount of energy required to back government paper currencies (see illustrative images below). Bitcoin is magnitudes more efficient.

references & Further reading

short form

Why Bitcoin Uses Energy, by Pete Rizzo

Bitcoin’s Proof of Work is Well Worth Its Fees, by Nic Carter and Lucas Nuzzi

long form

Bitcoin Does Not Waste Energy, by Parker Lewis

Bitcoin’s Energy Usage Isn’t a Problem. Here’s Why., by Lyn Alden

Bitcoin Net Zero, by Ross Stevens & Nic Carter

On Bitcoin’s Energy Consumption, by Galaxy Digital