Bitcoin responsible for 2/3 of energy consumption of crypto sector

05 Aug 2020

CryptocurrenciesBitcoin accounts for two-thirds of the total energy consumption of cryptocurrencies, according to new data from researchers from the Technical University of Munich (TUM).

In the Joule paper, the researchers study 20 cryptocurrencies, which account for more than 98% of the total market capitalisation of cryptocurrencies.

The report reads: “To estimate the energy consumption of cryptocurrencies beyond Bitcoin, we resort to a methodology proposed by Krause and Tolaymat that employs hash rates of cryptocurrency networks and suitable mining devices. Hash rates measure the processing power; they describe the number of attempts per second to solve a block in the so-called proof-of-work mining process.”

It concludes: “Based on the underlying algorithms, current hash rates, and suitable mining devices, we conclude that Bitcoin accounts for two thirds of the total energy consumption, and understudied cryptocurrencies represent the remaining one third. Therefore, understudied currencies add nearly 50% on top of Bitcoin’s energy hunger, which already alone may cause considerable environmental damage. 

“Including the remaining hundreds of mineable coins and tokens, which account for the 1.77% market capitalization not captured by the top 20, would further increase the share of energy consumption caused by cryptocurrencies besides Bitcoin.”

Bitcoin mining has been increasing throughout 2020 for several major reasons.  These include the May halving event. Occurring every four years, halving means that less and less Bitcoin – which is limited to 21 million units - will be mined.

In addition, there’s been increasing interest from institutional investors as well as international governmental agencies.