With a commitment to reinvest their proceeds into renewable energy infrastructure, as well as offering dividends to token-holders to further incentivise participation. Correspondence to With the help of this mechanism, the probability of being selected is linked to the amount of cryptocurrency that the node has deposited and locked (“staked”) for this purpose. Agreement about which new blocks to append is reached using a so-called consensus mechanism. This could be significantly improved by storing and verifying only short correctness proofs on a blockchain and distributing the larger, plaintext data on another layer to the relevant participants. This incident also illustrates that the upper bound is highly sensitive on the economic circumstances: Assuming that electricity prices dropped by the same rate as the prices for cryptocurrencies – which is in fact conceivable in an economic crisis – the upper bound (2) would remain unchanged. Moreover, it is well-known that Bitcoin consumes an enormous amount of energy  (De Vries 2018). Entering the current numbers – retrieved from Coinmarketcap (2020) and Coinswitch (2019) on 2020-02-05 – into (1) yields a lower bound for power consumption of 6.8 GW, which equates to an annual energy requirement of at least 60 TWh. Strikingly, such blockchains are “energy-intensive by design”. A non-PoW permissionless blockchain with a large number of nodes can already exhibit a significantly increased energy consumption due to the high degree of redundancy. A non-PoW permissionless blockchain with a large number of nodes can already exhibit a significantly increased energy consumption due to the high degree of redundancy. For example, by enabling the digitization of supply-chain processes, blockchain can substantially reduce the amount of paperwork and transport, including air-freight (Jensen et al. 2.1 on why coupling with a scarce resource is necessary). Moreover, not every household can afford a high bandwidth and large hardware storage, so higher requirements can also lead to a lower degree of decentralization. As an example of a small-scale enterprise blockchain, we refer to a Hyperledger Fabric architecture with 10 nodes, each on cloud instances with 32 vCPUs and therefore likely consuming a few thousand Watts in total. Blockchains in local energy markets can incentivise end-consumer participation . We repeated the calculation of the lower bound (1) and the upper bound (2) for the remaining 4 PoW cryptocurrencies with market capitalization of at least 1 billion USD. \end{aligned}$$, $$\begin{aligned} \text{mining rewards} + \text{transaction fees}&= \text{tot. Computer 51(2):54–58, Article  Copyright © 2013-2021 Project Provenance Ltd. All Rights Reserved. They should therefore be regarded a ballpark estimate, and reliable numbers have yet to be established. Yet, beyond PoW and, thus, on a completely different scale, the type of consensus mechanism can have a significant impact on energy consumption. The Last Word on Bitcoin’s Energy Consumption CoinDesk columnist Nic Carter is partner at Castle Island Ventures, a public blockchain-focused venture fund based in … Accordingly, a single transaction currently requires enough electrical energy to meet the needs of the average size German household for weeks, or even months. This means that, overall, there would be no noticeable increase in total energy consumption. Utilizing Merkle trees and hash-pointers, this data structure is highly tamper-sensitive, making retrospective manipulations easy to detect. However – as has already been pointed out in a critical ’Matters Arising’ response by Dittmar and Praktiknjo (2019) – when increasing the blocksize and, therefore, the throughput, according to our previous arguments, the energy consumption associated with mining would remain constant, and the energy consumption associated with the remaining tasks would still be negligible. Payment hubs, a generalization of payment channels to multiple parties, e.g., Nocust, or connections between them, e.g., Lightning for Bitcoin or Raiden for Ethereum, are the focus of active research (Gudgeon et al. (The Energy Consumption of Blockchain Technology: Beyond Myth) additionally states that in some instances, such as supply chain, the energy consumption of blockchain is still a massive improvement to the carbon emissions caused by the current system, which often includes a huge paper trail and generally slow and laborious processes. In this example, the interpretation is that the network does not require any incremental energy beyond what user machines would already be using. Bitcoin, the first application built on blockchain technology, is a decentralized payment system in which all participating computers (“nodes”) store a copy – or, more precisely, a replica, since there is no distinguished master – of the associated ledger. On the other hand, we know from other areas of IT that significant energy savings can be enabled by process optimization and digitization. Note that (1) does not depend on any other parameters and, therefore, gives a very reliable lower bound. If you’re not familiar with blockchain technology, read our, A legitimate cause for concern in the use of public Blockchains is the significant environmental impact from the energy consumption required. For non-PoW blockchains, however, the energy consumption related to consensus is no more enormous, and, therefore, the contribution to total energy consumption by redundant operations may be significant. This is because, the larger a block is, the longer it takes for it to be propagated by the worldwide blockchain network. In attempts to reduce the degree of redundancy, a concept called sharding is often mentioned. Research into technologies that maintain a distributed ledger without requiring a blockchain will also lead to energy efficiencies. Conveniently, these all happen to reduce the degree of redundancy and, therefore, improve the overall energy consumption. In: Proceedings of the 11th international conference on management of digital ecosystems, pp 126–133, Eyal I, Sirer EG (2014) Majority is not enough: Bitcoin mining is vulnerable. Use blockchain to spur energy-efficient transportation methods. By contrast, for large systems consisting of many nodes, the natural redundancy in a blockchain can lead to much higher energy consumption. However, we argue that, in addition to consensus, the redundancy underlying all types of blockchain technology can make blockchain-based IT solutions considerably more energy-intensive than a non-blockchain, centralized alternative. Instead, users validate each other’s transactions. Although the energy consumption of such a network will be negligible compared to Bitcoin, it will, therefore, remain high compared to a non-blockchain centralized system with minimal redundancy (i.e., because of backups). Compared to a global banking network with similar capabilities, but centrally controlled, this is a vastly higher energy requirement. This, in turn, correlates with the energy consumption associated with consensus. However, the technology is still new and smart contracts on a DAG-based ledger have not yet been proven. 5, we illustrate our findings by a first rough comparison of the energy consumption of some non-blockchain, centralized systems to that of basic blockchain architectures. The mining process is economically incentivized in that participants are rewarded for every valid block that is found and disseminated. The Energy Consumption of Blockchain Technology: Beyond Myth. 2019). Anyone can run a node for the common cryptocurrencies and participate in the consensus mechanism of their underlying blockchains using public key cryptography and hence without any form of registration. Understudied cryptocurrencies added 50% on top of Bitcoin's energy needs last year, according to de Vries. blocktime}\times \text{min. Finally, in some cases it may not be necessary to use a distributed ledger at all. Consequently, the more valuable a PoW cryptocurrency is, the better it is protected against attacks, confirming that PoW is, indeed, a thoughtful design. However, it is still many orders of magnitude less than for the current PoW blockchains such as Bitcoin with about \(10^9\) J per transaction. However, compared to a major Proof-of-Work blockchain, energy consumption is still negligible. A more precise estimate could be obtained by applying (2) to all remaining PoW cryptocurrencies. Appl Innov 2:6–19, De Angelis S, Aniello L, Lombardi F, Margheri A, Sassone V (2017) Pbft vs proof-of-authority: applying the cap theorem to permissioned blockchain. https://pdfs.semanticscholar.org/4d5b/9fb1c4205b61060117e3c71b04464c2a1c77.pdf. Bitcoin is not the only cryptocurrency on the block though. Bus Inf Syst Eng 1(5):400–402, Stoll C, Klaaßen L, Gallersdörfer U (2019) The carbon footprint of bitcoin. Criticism and potential validation of the estimate is discussed here. However, compared to a major Proof-of-Work blockchain, energy consumption is still negligible This results in coupling the voting weight to a scarce resource – computing power and thus energy – and hence prevents Sybil attacks. while massively reducing energy costs with only a few machines required to host and audit the ledger. 2, this is not an ideal metric for PoW blockchains but does correctly represent the order of magnitude. Considering the current discussions regarding climate change and sustainability, these statements could therefore inhibit or delay the widespread adoption of blockchain technology  (Beck et al. Figure 1 displays the resultant ranges for their respective energy consumption: Market capitalization and the computed bounds on energy consumption for the 5 highest valued Proof-of-Work cryptocurrencies. The high demand for energy arises due to an algorithm called Proof of Work. The probably best-known alternative for the permissionless systems required for cryptocurrencies and other open decentralized applications is the so-called Proof-of-Stake (PoS) consensus mechanism. We also argued that although the energy consumption of non-PoW blockchains and in particular permissioned blockchains which are used in enterprise context is generally considerably higher than that of non-blockchain, centralized systems, it is many orders of magnitude lower than that of PoW cryptocurrencies such as Bitcoin. Whereas in Proof of Stake miners stake cryptocurrency tokens, which they stand to lose if they behave badly. Furthermore, research is being conducted to replace Proof of Work with less energy-intensive algorithms which, on top of the energy savings, could provide better technical properties as well. To make interactions with our website easy and meaningful, we use Cookies. Beyond these popular consensus mechanisms, there are several more, an overview of which is provided by Eklund and Beck (2019). Generally speaking, the primary motivations behind all of the concepts presented in this section that may help to reduce redundancy are increased scalability, throughput, and privacy for blockchain solutions. SUSTAINABILITY MARKETING | Google Scholar, Beck R, Avital M, Rossi M, Thatcher JB (2017) Blockchain technology in business and information systems research. The block reward, i.e., the number of cryptocurrency coins one receives for solving a puzzle, the price of a coin, and current transaction fees are, again, publicly observable for every PoW cryptocurrency, meaning that only sensitive number which has to be estimated is the minimum electricity price. These are referred to as permissioned blockchains. Alex de Vries, a bitcoin specialist at PwC, estimates that the current global power consumption for the servers that run bitcoin’s software is a minimum of … Indeed, Bitcoin's energy consumption is designed to fall in the long run. However, it may still be relatively high for networks in which consensus is not energy-intensive, in particular, if the network is large. We conclude that, although the energy consumption of PoW blockchains is arguably enormous in relation to their technical performance, it does not represent an essential threat to the climate, even if significantly more transactions are processed in the future. Our estimates calculate an energy saving of over 95% would be possible, although the data to support this is not yet clear [1]. We can now use our results from the previous chapters to make a first comparison of the energy consumption of typical blockchain architectures. Moreover, since the area of application of most blockchains – and, in particular, the major cryptocurrencies – is often far beyond payments, plenty of opportunities for new ecosystems and business models arise. Importantly, rather than seeking to unnecessarily replace existing databases and processes, our use of Blockchain is focussed on where decentralisation can add value to brands and shoppers.
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