![]() This trend is likely to accelerate over time based on renewable energy sources becoming increasingly cost-competitive and often cheaper than burning fossil fuel. However, the growing energy consumption is not as bad as it initially sounds and is frequently portrayed.Īs miners are not confined to a specific location but can plug into the Bitcoin network from every place in the world with a sufficient internet connection, PoW miners have been gravitating to regions with higher shares of renewable energy (table 1 & figure 1). Accordingly, Bitcoin’s PoW miners are incentivized to add more and more computational power to the network, consuming more and more energy. Specialized PoW mining hardware devices generate computational power, so-called ASIC miners, which consume vast amounts of energy in the process. As a reward, these miners receive incentives in the form of block rewards (a fixed amount that is predetermined) and transaction fees (paid by each user conducting a transaction).īitcoin’s PoW miners compete for these incentives by adding computational power to the network the more computational power, the higher the chance to receive the incentive. This PoW network is run by validators, so-called miners, who add new blocks of transactions to the network on an ongoing basis. Proof-of-Work (PoW) is the consensus mechanism first popularized for permissionless blockchains and cryptocurrencies through the Bitcoin network. The amount of energy consumed by a blockchain or cryptocurrency network depends on its consensus mechanism, determining what information is added to the network ledger. ![]() ![]() High energy consumption is not intrinsic to blockchain technology in general, particularly not to the technology architectures that DDL and OEF are developing. Given the Data-Driven EnviroLab’s (DDL) and the Open Earth Foundation’s (OEF) ongoing research that investigates the potential for blockchain to improve climate action accounting, we want to set the record straight on blockchain’s real energy consumption and resulting climate implications and clarify the most prevalent misconceptions.įirst, Bitcoin’s high energy consumption is almost exclusively inherent to the Bitcoin network due to its architectural and governance design choices. Examples of how blockchain can support and accelerate climate action are Yale Openlab’s OpenClimate, the World Bank Climate Warehouse, the Blockchain for Climate Foundation, the Climate Ledger Initiative, and the Climate Chain Coalition, amongst others.īlockchain’s energy consumption currently receives a lot of attention while unfortunately being frequently misunderstood. Similarly, the use of blockchain as a uniform term and the confusion surrounding blockchain and Bitcoin causes public misperceptions, miseducation, and general uncertainty regarding blockchain technology.įor example, critics are quick to raise questions about blockchain’s potential negative implications for climate change due to the high energy consumption of Bitcoin, despite the technology’s significant potential to accelerate climate action. Still, they have very different use cases and designs. It is like using the Internet when you really want to refer to a specific application like Facebook, Amazon, Netflix, or Google - they are all based on the same infrastructure (i.e., the Internet). Unfortunately, blockchain is still frequently perceived and used as a blanket term synonymous with bitcoin rather than a broad group of diverse technologies. These new bottom-up and decentralized blockchain designs are desperately needed to overcome current legacy system thinking and path dependence to incentivize collaboration for major change and enable digital democracy for the Paris Agreement and climate action more broadly. Bitcoin is now a US$ 920 B financial network, and blockchain is hailed as a radically innovative technology that is set to disrupt how we govern data and exchange value in a transparent and decentralized way. Since then, both Bitcoin and blockchain have matured tremendously. From our medium blog post published at: in 2009, Bitcoin was the first application of blockchain or distributed ledger technologies (DLTs) more broadly.
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