Going Green: Energy Consumption Evaluation Part 1: Proof of Work Consensus Algorithms

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This article aims at being part one of a two-part series evaluating energy consumption in both the proof of work and proof of stake consensus algorithms vs. that of traditional banking systems and electronic payment processors.

Proof of Work and Proof of Stake Consensus Protocols vs Traditional Banking Systems

Proof of Work (PoW)  proof of work is a piece of data that is difficult (costly, time-consuming) to produce but easy for others to verify and which satisfies certain requirements. Producing a proof of work can be a random process with low probability so that a lot of trial and error is required on average before a valid proof of work is generated. (Bitcoin.it)

Proof of stake (PoS) — is a type of consensus algorithm by which a cryptocurrency blockchain network aims to achieve distributed consensus. In PoS-based cryptocurrencies, the creator of the next block is chosen via various combinations of random selection and wealth or age (i.e., the stake). (Wikipedia)

Traditional Banking Systems — A bank is a financial institution that accepts deposits from the public and creates credit.[1] Lending activities can be performed either directly or indirectly through capital markets. Due to their importance in the financial stability of a country, banks are highly regulated in most countries. Most nations have institutionalized a system known as fractional reserve banking under which banks hold liquid assets equal to only a portion of their current liabilities. In addition to other regulations intended to ensure liquidity, banks are generally subject to minimum capital requirements based on an international set of capital standards, known as the Basel Accords. (Wikipedia)

Energy Consumption Variables in Proof of Work

“Its consumption is roughly the same as Ireland’s” -The Econimist on Bitcoins current energy consumption. (July 9th, 2018.)


This section will explore the mechanisms associated with the successful network securitization of a chain via the proof of work consensus algorithm. Considering Bitcoin is unquestionably the largest, most established, and arguably most secure chain using PoW, we will discuss data associated with their network throughout this article.

Energy Consumption Variables
Personal Computers
ASIC Miners

Initially, home desktops were more than enough for cryptocurrency mining. Over time, miners switched to GPUs for more hashrate and CPUs became obsolete. You can still mine using older methods, but there will be insignificant profitability and hence useless effort, meaning your electricity bills will rise but profits will be minimal at best. Currently, there is specially designed hardware available for mining known as GPUs and ASICs. Some coins, however, are ASIC resistant and can be mined using GPUs only.

The overall argument isn’t whether or not Proof of Work algorithms use mass amounts of energy, but rather is the cost a necessary evil in exchange for immutability and the trustless systems that come with it. Some research on the subject has Bitcoins proof of work driven network uses as much energy globally as Ireland does in its entirety. Other articles claim that the transaction of 1 Bitcoin ‘is equivalent to 330,000 Visa transactions’ (robeco.com); its no surprise proof of work has its neigh sayers. With thousands of personal computers and even more GPUs and ASIC miners, the difficulty and competition for block rewards will only require more energy consumption increases, not less.


Is the juice worth the squeeze?

That depends, hierarchically speaking, where do you rank individual liberties, immutable ledgers, and decentralized networks on your list of unalienable rights? This will vary person to person of course, but assuming you rank order these resulting consequences of Bitcoin’s network reasonably high up, then yes, the energy usage associated with securing this network would be justified. But why rationalize something made unnecessary by technological advancement?

In part two of this series, we will examine what advancements in Blockchain consensus algorithms may have made Bitcoin’s current PoW powered network look brutish and archaic by comparison.

While no one can argue that Bitcoin (and other altcoins) mining consumes a lot of electricity (in absolute numbers) given that you need to run a network of few hundreds or thousands of very powerful computers all the time, the right way to look at this problem is not about the total consumption but to compare how efficient is Bitcoin relative to the alternative traditional centralized systems that we are predominantly using today and that one day crypto might replace. (Hackernoon)

About the author

Christopher Reeder is ODIN Blockchain’s Lead Content Strategist and Technical Writer. As an advocate and researcher, he is exploring technology’s impact on privacy.

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Published by Christopher Reeder

Making technology easier to understand.

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