In a PoS blockchain, voting power is tied to the capital deposited by each node. Bitcoin is not the only cryptocurrency on the block though. Some argue that getting rid of PoW’s energy consumption comes at the price of security, e.g., because one can only accrue voting weight (capital) from inside the system. Beyond these popular consensus mechanisms, there are several more, an overview of which is provided by Eklund and Beck (2019). On the other hand, an Ethereum full node on Geth which does not mine consumes approximately 0.1 J for a simple payment transaction, depending on whether or not idle power consumption is taken into account (own measurements). For example, PBFT consensus overhead scales at least quadratically with respect to the number of nodes in the network and is hence – by contrast to PoW and PoS – highly sensitive on the network size. If you’re not familiar with blockchain technology, read our introduction and FAQ. Joule 2(5):801–805, Dittmar L, Praktiknjo A (2019) Could bitcoin emissions push global warming above 2\(^\circ\)C? 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. It is, therefore, very energy-efficient for large-scale systems. 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. Since many of these types of consensus mechanisms are not currently prevalent in relevant applications, and because they usually have low energy requirements compared to PoW, we will not investigate these consensus mechanisms in more detail. Note the logarithmic scale on the y-axis. Yet, beyond PoW and, thus, on a completely different scale, the type of consensus mechanism can have a significant impact on energy consumption. The Ethereum Energy Consumption Index has been designed with the same purpose, methods and assumptions as the Bitcoin Energy Consumption Index. The article is meant to bring clarity to the topic in a holistic fashion, looking beyond claims regarding the energy consumption of Bitcoin, which have, so far, dominated the discussion. Accessed 05 Feb 2020, Crosby M, Pattanayak P, Verma S, Kalyanaraman V et al (2016) Blockchain technology: beyond bitcoin. We will not enter in this discussion up here but want to highlight that the outcome will likely decide which consensus-type for permissionless blockchains prevails and, therefore, impacts the energy consumption of future open decentralized applications. 2017). Trade-offs in distributed ledger technology designs. Reducing the workflows operated on-chain to a minimum, therefore, also mitigates concerns about the energy consumption. We have already seen that a portion of blockchains’ energy consumption relates to consensus, and another portion relates to redundant operations. However, one must be aware that mining hardware is in general blockchain-dependent because the algorithms used for hashing can differ. We strive to be an up-to-date resource for innovative businesses and individuals who are committed to long-term thinking when it comes to the creation, purchasing and life-cycle of products. Get in touch here. Since, on a permissionless blockchain, the inclusion of a distinct entity to provide accounts and passwords is not viable, authentication based on a public key infrastructure is highly suitable. While their energy consumption is, indeed, massive, particularly when compared to the number of transactions they can operate, we found that they do not pose a large threat to the climate, mainly because the energy consumption of PoW blockchains does not increase substantially when they process more transactions. At Iberdrola group we have begun a pilot project based on using blockchain to guarantee, in real time, that the energy supplied and consumed is 100 % renewable. Read by over 10,000 people in more than 30 countries. However, it is not as significant as recent reports about the blockchain energy consumption problem for currencies like bitcoin may indicate. Other participants have to follow suit with the competition. It calculates that Bitcoin's total energy consumption is somewhere between 40 and 445 annualised terawatt hours (TWh), with a central estimate of about 130 … They claim that if Bitcoin were to handle the number of transactions required by a worldwide payment system, the associated emissions alone would lead to a global temperature increase of 2 °C in the coming decades. 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. 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. Yet, in comparison it is much harder to give an estimation of the net impact blockchain could have on the creation and movement of currency as it could improve inefficient communication between data silos and offer financial transparency. On the other hand, we know from other areas of IT that significant energy savings can be enabled by process optimization and digitization. For permissioned blockchains, this might be particularly relevant when enterprises have to decide for or against a particular blockchain implementation. Consequently, many researchers and practitioners have realized that blockchain technology holds disruptive potential beyond its use in cryptocurrencies  (Beck 2018; Fridgen et al. This is because, unlike methods that lower the degree of redundancy, these do likely not have a negative impact on security because every transaction is still verified by every node. 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. An evaluation should therefore not only compare performance metrics and energy consumption, but also take into account the unique opportunities offered by this technology. At Provenance, we continue to monitor all emerging technologies and acknowledge that a single solution to reducing energy consumption in blockchain, without compromise on the security of a blockchain, is not yet apparent. 2016). Finally, for most PoW blockchains, the block reward is not constant, but periodically halved, typically, every few years. We also lack information on the quantification of their energy-saving potential for specific use-cases. Our estimates calculate an energy saving of over 95% would be possible, although the data to support this is not yet clear [1]. In: 25th IET Irish signals & systems conference 2014, pp 280–285, Rieger A, Guggenmos F, Lockl J, Fridgen G, Urbach N (2019) Building a blockchain application that complies with the EU general data protection regulation. We see that the lower and upper bounds are, in general, quite close and, therefore, represent a meaningful estimate of the actual energy consumption for each of the 5 major PoW cryptocurrencies. The value of the former is proportional to the cryptocurrency’s market price, so the success of cryptocurrencies on financial markets in the last years has provided a very strong incentive to participate in mining. Accessed 05 Feb 2020, O’Dwyer KJ, Malone D (2014) Bitcoin mining and its energy footprint. 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. *The assumptions underlying this energy consumption estimate can be found here. In Sect. Popular implementations of such permissioned blockchains are Hyperledger Fabric and Quorum. (Strictly speaking, we cannot consume energy, but merely change its form from valuable (e.g., electricity) to less valuable (e.g., heat) energy. 2019). For example, sharding is very difficult to apply to PoW blockchains, because one has to make sure that, within a shard, computing power is roughly equally distributed to maintain a balance of voting weight among the associated nodes. This indicates that the total energy consumption of all PoW cryptocurrencies other than Bitcoin will fall below our upper bound for the energy consumption of Bitcoin. Specifically, Bitcoin combined several well-known concepts from cryptography to form the so-called PoW. Whereas in Proof of Stake miners stake cryptocurrency tokens, which they stand to lose if they behave badly. In Sect. 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. We arrived at our estimates in the following way: A simple key-value store such as LevelDB can sustainably operate tens of thousands of transactions per second on office hardware with a power consumption of less than 100 W (own measurements), which yields less than \(10^{-2}\) J per transaction. Today, the role of, THE PROBLEM WITH OFFSETTING | To make interactions with our website easy and meaningful, we use Cookies. However, one can also argue that PoS has less of a tendency to centralize (mining has economies of scale) and is, thus, more secure in the long run. (2018) Hyperledger fabric: a distributed operating system for permissioned blockchains. And Bitcoin's energy consumption isn't tied to the number of transactions the network handles. The role of consensus has already been discussed in Sect. 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. Consequently, it is an important dimension to consider during the conception of a blockchain-based IT solution (Kannengießer et al. Transparent ledger systems such as these are in the early stages of development and currently suffer from issues related to their centralized nature, nonetheless an interesting area to watch. This information is publicly available and can, therefore, be freely used in creation of shards. J Assoc Inf Syst 19(10):1020–1034, Beincrypto (2020) Bitcoin’s hash rate retraces 40% this month, slips under 100 ehash/s. electricity price}}. However, as discussed in Sect. In summary, our lower and upper bounds represent different approaches and use different quantities that have to be estimated. Blockchains in local energy markets can incentivise end-consumer participation . Bus Inf Syst Eng 1(5):400–402, Stoll C, Klaaßen L, Gallersdörfer U (2019) The carbon footprint of bitcoin. Such channels usually require a transaction on the blockchain, in the course of which off-chain payment channels are created and terminated. The deposit also incentivizes the node to stick to the rules of the network, as any misbehavior detected will lead to the node losing this deposit. Therefore, it is not necessary to tie voting weight to a scarce resource here, and one can reach consensus using some kind of election in which everyone has a single vote. blocktime}\times \text{min. Blockchains are found to consume exorbitant amount of energy because of the algorithm followed for its creation. - 5.189.155.230. However, results regarding the energy consumption of PoW cryptocurrencies and blockchain technology in general are rare. Therefore, energy that is clean and free, but too remote to feed into the grid, can be used to mine with marginal impact. This benefits the masses because it reduces control from central authorities, plus it allows users to be truly in charge of their energy supply. On the other hand, blockchain technology can also be useful in constellations in which only a restricted group of participants take part in consensus. In summary, there are various ways to reduce the intrinsic redundancy of blockchains and, therefore, to reduce also their energy consumption. A typical non-blockchain, centralized system in applications will use a more complex database and backups, thus mildly increasing the energy consumption. This is, in fact, a reasonable approximation: for the lower bound, we only lose some tightness. 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 … During the blockchain process proof-of-work (PoW) has to be maximized and this PoW chains rely on the network resources consumption to protect them from malicious attackers. Designed as a proven mechanism to secure public blockchains, such as Bitcoin, it incentivises the participants of the blockchain (miners) to spend large amounts of electricity in exchange for Bitcoin. We argued that using blockchain technology with non-PoW consensus – which is the case in an increasing number of business applications – already substantially mitigates sustainability issues. Conveniently, these all happen to reduce the degree of redundancy and, therefore, improve the overall energy consumption. Hence, it is not only alternative consensus mechanisms that one should look at to further reduce the energy consumption of blockchain technology, but also concepts which allow reduced operation redundancy. 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. However, compared to a major Proof-of-Work blockchain, energy consumption is still negligible For example, in a 1 MB block used in Bitcoin, there can only be a maximum of around 2000 transactions. However, we still lack reliable information on the detailed energy consumption of different non-PoW blockchains. This gives an upper bound of approximately 125 TWh per year for the energy consumption of Bitcoin, using data from Coinmarketcap (2020) for 2020-02-05. This argument is, however, based on the assumption that the economic quantities from the estimate of the upper bound (2), namely, the prices for electricity and the respective cryptocurrency, remain constant. However, Bitcoin still dominates many people’s perceptions of blockchain technology. 2018b; Rieger et al. Strikingly, such blockchains are “energy-intensive by design”. Generally speaking, however, reducing the degree of redundancy also makes a blockchain network more centralized and must, therefore, be carefully weighed against concerns about security, liveness, and trust. On the other hand, if electricity prices generally dropped by 50%, e.g., due to decreased demand or increased feed-in of renewables, or a rush for cryptocurrencies led to an increase of their prices by 100% and, therefore, to a level that we have already observed by the beginning of 2018, our upper bound would double in each of the scenarios, and even quadruple if both happened to occur at the same time. Use blockchain to spur energy-efficient transportation methods. By contrast, traditional payment systems process, on average, thousands of transactions per second, and as many as tens of thousands at peak times. They are of particular interest to many industries and, also, to the public sector: participants usually build a consortium, and there is a registration process meaning that all of the participants in consensus are known (Fridgen et al. This gives a lower bound of the energy consumption of an arbitrary PoW blockchain: This estimate indicates the lower bound, reflecting the likelihood that more solutions are found than disseminated, that further computations – in addition to mining – are being carried out, and that not every miner has the most energy-efficient hardware. PubMed Google Scholar. Determining the exact value for the energy consumption of a multitude of open, distributed networks is a hard task because the precise number of participants, the properties of their hardware, and the effort which they put into mining are unknown. In Sect. The underlying technology, blockchain, provides a means to store information chronologically and redundantly on a decentralized database, and an agreement process through which the nodes synchronize and modify their global state (“operate transactions”) (Crosby et al. (2018) extrapolate the energy consumption of a single Bitcoin transaction to the order of magnitude required for handling payments on a global scale. We decided to display the energy per transaction. This results in coupling the voting weight to a scarce resource – computing power and thus energy – and hence prevents Sybil attacks. It will also involve a discussion about the compromise between the degree of decentralization, security, performance, energy consumption, and further metrics which are of importance for blockchain-based use-cases. In: Proceedings of the 52nd Hawaii international conference on system sciences, Krause MJ, Tolaymat T (2018) Quantification of energy and carbon costs for mining cryptocurrencies. 2019), or allow for more targeted recalls, leveraging many opportunities to reduce carbon emissions. 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. In both estimates, we have, so far, only taken into account the energy consumption involved in mining, i.e., solving the cryptographic puzzles, and neglected the energy consumption of the other tasks which have to be performed on the participating nodes, mainly, validating new blocks and updating their local databases accordingly. If a PoS or alternative non-PoW blockchain replaces Bitcoin or another PoW cryptocurrency in the future, we have to expect that there will still be tens of thousands of nodes. Even for a million nodes – and taking into account differences in efficiency between common and specialized mining hardware, given that ASICS can be millions of times more efficient than CPUs at computing hashes – the energy consumption associated with mining is still orders of magnitude higher than the energy consumption required to maintain the nodes (De Vries 2018). This implies a drop of the upper bound (2) in our model by the same rate, and, indeed, the total hash rate was observed to drop by approximately 30% shortly after: Seemingly, mining was no longer profitable for some miners at this point (Beincrypto 2020). These are referred to as permissioned blockchains. At this point, it is important to emphasize that further increasing the energy efficiency of mining hardware would not reduce a PoW blockchain’s energy requirements in the long term: To keep the average time for solving a puzzle constant, and, hence, to ensure the security and constant functionality of the network, the difficulty of the cryptographic puzzles is periodically adapted to the total computing power of the network. Research into technologies that maintain a distributed ledger without requiring a blockchain will also lead to energy efficiencies. Fortunately, the PoW consensus mechanism, which – as already described – was designed to be energy-intensive, is not the only way to achieve consensus in a distributed system. 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. On the other hand, Ethereum was designed to prevent the use of highly specific mining hardware, so general-purpose GPUs can be used for mining. That’s more than the country of Switzerland uses over … In: International conference on financial cryptography and data security, pp 436–454, Fridgen G, Lockl J, Radszuwill S, Rieger A, Schweizer A, Urbach N (2018a) A solution in search of a problem: a method for the development of blockchain use cases. The Energy Consumption of Blockchain Technology: Beyond Myth. Bitcoin Electricity Consumption Index Discrepancies. Accessed 05 Feb 2020, Gudgeon L, Moreno-Sanchez P, Roos S, McCorry P, Gervais A (2019) SoK: off the chain transactions. Agreement about which new blocks to append is reached using a so-called consensus mechanism. To view a copy of this licence, visit http://creativecommons.org/licenses/by/4.0/. The relative energy saving potential is, however, negligible for PoW blockchains as the energy consumption of mining dominates all other contributions. Bus Inf Syst Eng 1(4):273–276, Coinmarketcap (2020) Top 100 cryptocurrencies by market capitalization. It is their high energy consumption that protects PoW blockchains from attacks: Depending on the scenario, an attacker must bear at least 25 to 50% of the total computing power that participating miners use for mining – and, thus, the same proportion of the total energy consumption (under the assumption of equal hardware) – to be able to successfully manipulate or control the system (Eyal and Sirer 2014). https://bitcoin.org/bitcoin.pdf. If material is not included in the article's Creative Commons licence and your intended use is not permitted by statutory regulation or exceeds the permitted use, you will need to obtain permission directly from the copyright holder. Other concepts to reduce the degree of redundancy include off-chain payment channels between two parties who repeatedly interact. 2020). One perspective to take is that it is easy to estimate Bitcoin’s energy consumption by looking at “how hard” the miners have to work. Open Access This article is licensed under a Creative Commons Attribution 4.0 International License, which permits use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons licence, and indicate if changes were made. If, however, storage capacities (hard disks) and network speed continue to improve worldwide, a considerable increase in block sizes might be conceivable in the future. ... blockchain … Blockchain is considered as the secure public chain for transactions and it assumes that the miners involved in a transaction do not consume much energy. The pseudo-randomness typically comes from a subset of the previous blocks) that determines who is allowed to build (“mint”, “forge”, “bake”) and attach the next block. That is to say that, ideally, only balances, or accumulated deltas signed by the members on the payment hub, are periodically recorded on-chain. 2018a; Labazova et al. By continuing to use this site, you consent to this policy. https://pdfs.semanticscholar.org/4d5b/9fb1c4205b61060117e3c71b04464c2a1c77.pdf. 2, this is not an ideal metric for PoW blockchains but does correctly represent the order of magnitude. The details of the latter can be found here. This trade-off has already been discussed, e.g., in Bitcoin Magazine (2018). [1] Based on Ethereum network, assuming that all nodes could be replaced by 1kw machines. The images or other third party material in this article are included in the article's Creative Commons licence, unless indicated otherwise in a credit line to the material. 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. 15 for Ethereum and Bitcoin and 100 for Bitcoin Cash. Consequently, the energy consumption of non-PoW blockchains can hardly be considered problematic for the climate. Using this technology, we have managed to link plants where electricity is produced to specific points of consumption, allowing the source of the energy to be traced. Utilizing Merkle trees and hash-pointers, this data structure is highly tamper-sensitive, making retrospective manipulations easy to detect. In particular, it also addresses the need for a detailed investigation into the energy consumption of blockchain technology, as pointed out in Beck et al. On the other hand, for small networks, redundancy does not add much absolute energy consumption, particularly when compared to the scale of PoW blockchains’ energy consumption. PoS has already been adopted by several blockchains [2][3][4] and is due to adopted by others , but it is not yet as stress tested as Proof of Work in regards to security. 6. Three areas of research show promise here. 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. The network is composed only of user machines operating as usual, with only some computer power dedicated to the network. This can have a negative effect for latency (the time it takes to distribute a new block to all nodes) and, also, security: More solutions to the puzzles are likely to be found as a certain block propagates through the network, splitting the honest miners’ resources and, therefore, leaving the network more vulnerable to attack. In this article, we first analyzed the energy consumption of today’s prevailing PoW blockchains, which underly most cryptocurrencies. 2019). (2017). According to BECI, Bitcoin currently uses almost a whopping 80 TWh per year. Accessed 5 Feb 2020, Jensen T, Hedman J, Henningsson S (2019) How tradelens delivers business valuewith blockchain technology. They should therefore be regarded a ballpark estimate, and reliable numbers have yet to be established. In “The Energy Consumption of Blockchain Technology: Beyond Myth” published in BISE, Johannes Sedlmeir, Hans Ulrich Buhl, Gilbert Fridgen & Robert Keller analyze the energy consumption within and across different blockchain architectures (proof of work, proof of stake, permissioned, etc. Over the course of a year that’s equal to around 64 TWh or terawatt hours of 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, based on our arguments regarding the energy consumption associated with operating transactions in Sect. **The minimum is calculated from the total network hashrate, assuming the only machine used in the network is speaking, we cannot consume energy, but merely change its form from valuable (e.g., electricity) to less valuable (e.g., heat) energy. The possibilities above relate to … 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. Cryptology ePrint Archive, Report 2019/416, https://eprint.iacr.org/2019/416. Accessed 26 Mar 2020, Ben-Sasson E, Bentov I, Horesh Y, Riabzev M (2019) Scalable zero knowledge with no trusted setup. Together, these remain a field for future work, which will involve a more detailed analysis of the role of consensus, as well as transaction-based overheads and efficiency, for a large subset of the consensus mechanisms and blockchain implementations available. The first and most widely expected to succeed is an alternative to Proof of Work called Proof of Stake (PoS). According to Androulaki et al. https://beincrypto.com/bitcoins-hash-rate-retraces-40-this-month-slips-under-100-ehash-s/. Recent developments in Verifiable Data Structures have opened up the possibility of operating a central ledger, while allowing third parties to verify that the operator is not cheating by attempting to modify the contents of the ledger in invalid ways. In practice, however, the blocks cannot be enlarged at will. Stay up-to-date with monthly news and updates. In: Proceedings of the 52nd Hawaii international conference on system sciences, Lockl J, Schlatt V, Schweizer A, Urbach N, Harth N (2020) Toward trust in internet of things (IoT) ecosystems: design principles for blockchain-based IoT applications. Other cryptocurrencies, such as EOS, Tezos, and TRON – all of which feature in the Top 20 cryptocurrencies in terms of market capitalization – are already successfully using PoS. In: Annual international cryptology conference, pp 701–732, Bitcoin Magazine (2018) What is the bitcoin block size limit? 2, we first provide some technical background for Proof-of-Work (PoW) blockchains and determine the level of their energy consumption. Welcome to Provenance!
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