When it comes to sustainability, many industries are considering how to reduce their energy consumption. Organizations are also taking a more critical look at how their services and products may impact the environment. With the rise in digital currency, new discussions are emerging about the value of cryptocurrency and its energy usage. Even though it is a virtual concept, it requires vast amounts of energy – energy which must be generated primarily from burning fossil fuels alongside renewables and the other mix powering the grid.

To really understand just how much energy cryptocurrency consumes, it is important to break down the inner workings.

Cryptocurrencies such as Bitcoin, Litecoin, and Ethereum run on blockchain technology. Blockchains store information in a digital format to maintain a secure record of transactions. These blockchains arrange data into groups that are linked together across a network. Once formed, these blockchains are permanent. Therefore, it is nearly impossible to counterfeit forms of cryptocurrency due to their permanently recorded and transparent design.

For the creation of successful blockchains, cryptocurrency must be mined. Mining is a complex, mathematical process that is also time-consuming. It boils down to building out digital infrastructure within networks – by mathematically engineering blocks, miners are rewarded with bitcoin. Additionally, mining cryptocurrencies such as Bitcoin requires computer hardware also known as application-specific integrated circuits or ASICs. This hardware is used in crypto mining rigs or farms with graphic cards that often run 24 hours a day. Server farms and dozens of computers often underpin mining operations, which draw significant power for processing and still more power for cooling the heat-radiating computers.

One set up in Kazakhstan is outfitted with 50,000 Bitcoin mining rigs. Aside from consuming lots of power, these mining rigs also generate a lot of heat. These rigs need to be cooled properly, which requires further electricity, especially in large mining centers. So exactly how much energy is consumed by mining cryptocurrency?

A data analysis by the New York Times demonstrates that Bitcoin mining consumes about 91 terawatt-hours of electricity annually. That is more electricity than the nation of Finland – and its nearly 5.5 million people – consumes. The New York Times also estimates that it takes roughly “13 years of standard household electricity” to mine a single Bitcoin. While these figures are staggering, the good news is that the future of cryptocurrency is looking to be more sustainable.

Asset managers are working to strike a balance between the environmental effects of cryptocurrency and its earning potential. China’s Sichuan Province has harnessed their affordable hydroelectric power to incentivize blockchain firms to relocate their operations to reduce energy consumption. Operators of Ethereum are completing an upgrade to its blockchain mechanics that will save power by redirecting computers that are not selected to make blocks for the blockchain to instead validate the created blocks. Other startups have gotten creative with their solutions. Hong Kong-based startup LiquidStack is looking to lower the temperature of mining rigs to exclusively use renewable energy sources. Additionally, cryptocurrency can transition to “proof-of-stake” systems that do not require the same amount of energy consumption as computational elements. Some cryptocurrencies are introducing pre-mining methods that eliminate the need for high-powered mining hardware but still verify transactions through a decentralized network.

The delicate balance between sustainable energy usage and the advancement of modern technology continues to be at the forefront of innovation. Cryptocurrency has opened the dialogue for just how well we can manage this equilibrium.


Written by Rachel Spencer, Communications Intern


The Alliance for Innovation and Infrastructure (Aii) is an independent, national research and educational organization. An innovative think tank, Aii explores the intersection of economics, law, and public policy in the areas of climate, damage prevention, energy, infrastructure, innovation, technology, and transportation.