5 Ways to Solve the Bitcoin Mining Energy Crisis

There has been a lot of talk in the news recently about how much energy Bitcoin mining uses and its potential impact on the environment. Today we explore just how much energy Bitcoin mining really uses and 5 possible ways to reduce or offset its power consumption. In 2011, Google revealed that it used enough […]
There has been a lot of talk in the news recently about how much energy Bitcoin mining uses and its potential impact on the environment. Today we explore just how much energy Bitcoin mining really uses and 5 possible ways to reduce or offset its power consumption. In 2011, Google revealed that it used enough […]

There has been a lot of talk in the news recently about how much energy Bitcoin mining uses and its potential impact on the environment. Today we explore just how much energy Bitcoin mining really uses and 5 possible ways to reduce or offset its power consumption.


In 2011, Google revealed that it used enough energy from fossil fuels to continuously power 200,000 homes, which is about one quarter the output of a nuclear power plant. At the time, one Google search was equivalent to turning on a 60W light bulb for 17 seconds.

That’s a lot of energy usage.

Fast forward to today, Google just announced that they purchased enough clean energy in 2017 to offset their entire carbon footprint. They assigned a lot of smart people to work on the problem, invested billions in reducing their carbon footprint, and made huge energy efficiency gains.

Enter Bitcoin and the criticism of its ever-increasing carbon footprint.

If you believe the researchers, the annual amount of energy needed to mine Bitcoin is more than the entire annual electricity needs of Ireland. Moreover, according to Dutch bank ING, the energy required to trade a single Bitcoin can power a house for an entire month.

This means that mining Bitcoin is contributing to global climate change.

Just How Expensive is Bitcoin Mining?

Just How Expensive is Bitcoin Mining?

According to Digiconomist, Bitcoin uses about 32 terawatts of energy every year, enough to power about three million U.S. households. Worse, they claim, the energy required to mine Bitcoin is about to scale exponentially.

Many people are under the mistaken belief that Bitcoin mining is based on a mathematical formula that gets steadily more difficult to solve as more and more Bitcoins are produced.

That’s inaccurate.

The Bitcoin founders developed the network to automatically adjust the difficulty of mining to make certain that one block is generated every 10 minutes, regardless of the level of computing power there is on the network.

In 2009, when Bitcoin launched, every block produced yielded 50 Bitcoin as payment for the miner who produced it. That amount decreases by half every four years. In 2012, it decreased to 25 bitcoins and in 2016 to 12.5 Bitcoins per block. The compensation will decrease again to 6.25 bitcoins in 2020.

Logically then, when revenues are cut in half, the cost of producing it should decrease by the same proportion, else miners would find it unprofitable.

Still,  Eric Holthaus from Grist sees it a different way and writes that at current growth rates, the Bitcoin network will “use as much electricity as the entire world does today by early 2020. This is an unsustainable trajectory.”

Is This Really a Problem?

First, I think it’s fair to ask, do we need to fix the problem? Like any other form of physical stores of value (e.g. Gold, oil, fiat currency) it takes energy to produce them. Mining for gold and drilling for oil have massive impacts on the environment.

But Bitcoin is digital so why design it to consume more energy than required?

Satoshi Nakamoto anticipated the increasing energy question and designed Bitcoin to roughly equalize the cost of mining a block with the current value of the block.

He built in a form of scarcity and enforced through the Proof of Work algorithm. Scarcity and an identity-less, fair distribution mechanism are why Bitcoin is skyrocketing in value.

Some people are okay with this original arrangement despite the costs to the environment. They argue that the cost of a secure and transparent money system is worth the impact to the environment.

I’m not totally bought into that argument as Bitcoin could – in theory – still fail and therefore the whole exercise – futile.

So What are the Solutions to the Environmental Issue?

The solution may not yet be invented but there are at least five viable options I’ve uncovered that I believe are worth exploring.

  1. First, as Google did, the Bitcoin mining community can purchase clean energy offsets to lessen the impact on the environment. But this is highly unlikely because unlike Google, the miners aren’t all working under a single executive team.
  2. Miners can begin to transition to an eco-friendlier power source like Vienna-based HydroMiner, who uses renewable hydroelectric power to mine Bitcoin. I believe we will see more miners heading this direction, but it will only be a small percentage of them until the cost of renewable energy sources are less and there are easy access points. Currently, both are an issue in less renewable energy developed countries like China and Russia.
  3. This is really a 2a, but the community could further incentivize miners with additional Bitcoin by rewarding them for using renewable sources. This could be programmed into the algorithm or offered as a bonus for proof of renewables. Admittedly, there are difficulties in updating the miner payout process, but if there is a goodwill, there is always a crypto way.
  4. A fourth option would be to switch to a Proof of Stake (PoS) mining process with a twist. Whereas PoS seeks to validate block transactions according to the coins she or he holds, one can add an additional requirement to give more mining weight to those using renewable energy sources. Like #3 above, switching to an alternative mining algorithm would be strongly opposed by miners that have invested huge sums of money in their current systems.
  5. The fifth and my own option is to offer a 1000 Bitcoin reward (roughly $17,000,000 USD) for the first individual or group that presents a zero-carbon solution to the problem with the least disruption. A committee of environmental scientists and crypto experts would weigh each of the submissions and nominate 5  solutions for Bitcoin holders to vote on. The community would vote with a small amount of Bitcoin to help fund the reward and to ensure fairness. Then, with community consensus, the Bitcoin developers would implement the changes. The key here is funding the reward. If the reward can’t be raised by the voting mechanism, then that may be a fatal flaw in this option.

Summing it All Up

Ultimately, there’s an argument to be made that we should just allow the current mining process to play out. As the cost of mining becomes too expensive, there is a built-in mechanism to reduce the amount of energy expended to validate a block.

Moreover, truly free markets enable Capitalists to innovate. If there’s big money involved, there will be efficient solutions created to squeeze out a profit. Since energy costs are the largest mining expenditure, the most innovative solutions will be created to both reduce energy usage and costs.

I suspect open market competition over scarce resources is going to help mitigate the environmental impact and transparently assigning an energy value to back the system is going to provide a scorecard. We need to balance the environmental impact with the cryptocurrencies that solve real problems with real value associated with them.

I’m betting that final balanced scorecard is in favor of continued mining.

What do you think of the solutions presented here? Can you think of any other possible solutions to solve the Bitcoin mining energy problem? Let us know in the comments below.


Images courtesy of AdobeStock, Wikimedia Commons