Network latency in bitcoin mining is resulting in significant energy waste, with estimates suggesting the equivalent of Switzerland’s entire hydroelectric generation capacity is squandered annually. This energy loss is attributed to inefficiencies in the mining process and growing competition among miners.
A recent study published in PNAS Nexus on May 26 highlights a theoretical model designed to measure patterns within the networks that support bitcoin’s distributed ledger. Researchers calculated that by 2025, around 16,000 megawatts could be lost due to unproductive mining attempts. This volume of wasted energy matches the total output of Switzerland’s 701 hydropower plants, as reported by the Swiss Federal Office of Energy.
It’s crucial to differentiate this figure from the overall energy consumed by bitcoin mining operations, which is projected to reach approximately 138 terawatt-hours annually by June 2024. This figure exceeds the total energy consumption of several developed nations, including Norway and the Netherlands.
The environmental implications of bitcoin and other proof-of-work blockchain technologies have sparked considerable debate in recent years. A 2023 U.N. report highlighted that bitcoin mining’s water consumption, mainly utilized for cooling equipment, could provide more water than what is used by 300 million people in rural sub-Saharan Africa.
Bitcoin operates on a proof-of-work model, requiring substantial computational power to solve complex digital puzzles in order to generate new cryptocurrency units. In this competitive landscape, the first miner to solve a problem adds a new block of transactions to the blockchain and earns a predetermined amount of bitcoin. The competitive nature of mining has intensified, especially with the surge of interest in bitcoin as a trading asset.
Given the fierce competition among miners, the margin between first and second place can be minimal, often resulting in “accidental forks.” These forks occur when two competing blocks are confirmed nearly simultaneously, leading to inefficient validation where one block becomes invalid despite both requiring significant energy input.
The wasted energy is mainly attributed to the resources expended in generating “orphaned blocks”—blocks that do not become part of the permanent blockchain. Researchers indicated that this inefficiency not only elevates operational costs but also exacerbates bitcoin’s environmental impact while attempting to uphold network security.
According to the Crypto Carbon Ratings Institute, bitcoin’s market capitalization exceeds $1.1 trillion, making it the dominant cryptocurrency—over 80% larger than its closest rival, Ethereum, which operates on a less energy-intensive proof-of-stake model. Retail mining businesses have invested heavily in specialized data centers as they vie for the lucrative mining rewards, leading to a significant increase in energy consumption.
Whereas previous assessments treated all miners as equal, this study accounted for variables like network latency and geographic distribution to establish a baseline for future analyses. It pointed out a noticeable shift in mining pool dominance, showing a decline in Chinese mining operations following the government’s crackdown. Today, a mere three mining pools account for over 50% of all new bitcoin blocks. This consolidation raises concerns about the potential for a “51% attack,” enabling miners to manipulate blockchain data by consistently producing the longest chain.
Additionally, this level of market concentration distorts transaction processing fees within the bitcoin ecosystem, allowing miners to delay the inclusion of specific transactions in blocks arbitrarily.
