In recent months Bitcoin is increasingly being criticized for the huge amount of energy the protocol needs to operate and mine the cryptocurrency.Gianmarco GuazzoMar 2 · 5 min readPhoto by Federico Beccari on Unsplash
According to Cambridge researchers, the Bitcoin protocol consumes roughly 120 thousand Terawatt hours per year, as much as Argentina or the Netherlands and the trend is bound to continue if the price will do the same. So let’s try to understand why energy consumption is critical to its protocol security and why it is closely related to price.
As it is now known Bitcoin in order to work requires an indefinite amount of distributed computers able to put their computing power at the disposal of users to validate their transactions. In exchange for the consumption of energy and computing resources, the Bitcoin protocol rewards “miners” with brand new coins. Bitcoin’s monetary policy, through the Halving mechanism, will allow miners to create a maximum of 21 million Bitcoins making BTC the only truly finite asset in absolute terms in the world. The consumption of energy by the protocol therefore derives from the now specialized use of computers capable of solving a particular “puzzle” to certify the transactions carried out in the network. The specialization of mining has led to the creation of buildings and warehouses made available exclusively to this activity, bringing the average energy consumption in some particular areas of the world to increase significantly.
The security of the protocol
As it is easy to imagine, mining activity is vital for cryptocurrency that makes Proof