Think Visa transactions are energy intensive? Here’s a look at what Crypto currencies can require.
Crypto is a growing digital (sort-of) currency that provides a medium of exchange that is not supported by any government or bank. It uses very strong security algorithms to record transactions. The number of crypto currencies has grown from one (Bitcoin in 2009) to over 20,000 today.
The amount of energy needed for a crypto exchange varies widely based on the transaction recording approach. Bitcoin and others use a proof of work method called mining where intensive computations are performed to add transactions (blocks) to the ledger (blockchain). It is difficult to calculate how much energy is needed for a single crypto transaction since the mining is distributed across the world, but one recent study estimates that a single conventional VISA transaction uses 1.5 watt-hours and a single bitcoin transaction uses 703,250 watt-hours. The US Energy Information Administration estimates that in 2022 electricity use from crypto mining was between 0.6% to 2.3% of the total US electricity consumption.
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Ethereum and others use a different process called proof of stake where users put up a portion of their crypto (a stake) to validate transactions on the blockchain. This process does not require extensive computations and uses considerably less energy than proof of work transactions. Ethereum believes that the proof of stake system will use 99.95% less energy than proof of work (about 352 watt-hours per transaction; still 235 times more energy than VISA).
Crypto proof of work mining uses large amounts of electricity and is one of the drivers of data center growth. A previous Environmental Cents article showed how data centers are causing significant increases in fossil fuel generation of electricity. Here’s what you can do to help:
- Minimize your use of cryptocurrencies.
- If you do use them, make sure they use the proof of stake methodology.
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