The relationship between Bitcoin and renewable energy

Bitcoin and cryptocurrency have been all the craze lately, but before you even consider getting into this area, it’s important to know about the environmental implications. If you’re relatively new to this topic and want to learn more about the cryptocurrency space, this is a great article to get you started.

By Hedy Zhou

July 29, 2021

Bitcoin is not environmentally friendly

What are cryptocurrency and Bitcoin?

Cryptocurrency is a digital currency secured by cryptography, a method of protecting information through codes so that only the sender and intended recipient of the information can view its contents. Bitcoin (BTC), specifically, is a form of cryptocurrency and currently has the highest market capitalization of all cryptocurrencies. It is a decentralized network that records transactions on blockchain technology, which essentially acts as a ledger where transaction data is organized. The blockchain consists of blocks, which record the data of some or all of the most recent Bitcoin transactions (analogous to a page of a ledger book). Bitcoin's blockchain is distributed, meaning that it is publicly available, though there are complicated measures in place to help protect the blockchain ledger and any updates made to it.


This article will specifically focus on the mining aspect of Bitcoin, as opposed to its value or trading purposes since the mining process consumes huge amounts of electricity. Miners are required to record the transactions and maintain the ledger (and are compensated through Bitcoin for their work). The mining process is designed to be difficult in order to prevent fraudulent transactions from being logged, which results (on average) in each miner producing only one valid block every 10 minutes. The protocol continuously adjusts the difficulty of mining to maintain this rate.

How does Bitcoin use/relate to energy?

The reason why Bitcoin is so damaging to the environment and our health is because its mining process requires a lot of energy and the energy is primarily sourced from fossil fuels. The more valuable a single bitcoin becomes, the higher the incentive is to participate in the mining process. Since the protocol restricts the number of new blocks being mined to only one every 10 minutes, more computing power is required as mining becomes harder with increased competition as more people are trying to mine. This causes Bitcoin miners to spend more on hardware and electricity to compete in the block creation process. Therefore, as you see Bitcoin’s price grow, the network’s power requirements are increasing as well, which presents issues related to sustainability and efficiency.

Bitcoin energy usage as environmental impact

A misconception that has been brought up in relation to Bitcoin and energy is the concept that Bitcoin stores or transfers energy. A transaction in Bitcoin is simply an entry in a ledger; there’s no physical property of Bitcoin that would allow it to be used for energy storage.  Therefore, a Bitcoin transaction will not have the ability to create a new joule of energy or transfer any energy. Just like a dollar bill or credit card, Bitcoin can be used as a form of payment for power but is not able to store or transmit energy.


How much energy does Bitcoin use then? The Digiconomist provides a detailed quantified look at Bitcoin’s energy consumption. The carbon footprint of Bitcoin’s network is comparable to that of Serbia & Montenegro, 63.12 metric tons of carbon dioxide per year. In addition, it creates 6.57 kilotons of electronic waste annually, comparable to the e-waste generation of Luxembourg. This amount of electronic waste mainly comes from Bitcoin miners’ usage of highly specialized mining hardware, as the hardware is usually short-lived and cannot be repurposed. Other cryptocurrencies may instead use general-purpose hardware to run their mining processes, which can be repurposed once it cannot be profitably run, making them more green compared to Bitcoin.


Because of these environmental concerns, companies have been adjusting their stance on Bitcoin. For example, Tesla suspended the purchase of vehicles using Bitcoin just 50 days after enabling it, which highlights an increased public awareness of ESG (environmental, social, governance) issues.

Renewable energy, such as solar power, can be used to make Bitcoin greener

Making Bitcoin greener

If we think about more creative ways to power Bitcoin, there are some greener alternatives such as using renewable energy. However, powering Bitcoin with energy derived from wind or solar instead of fossil fuels is not without complications. If the goal is to use 100% renewable energy, storage systems become vital since it’s not always sunny or windy. Solar energy is naturally intermittent (it fluctuates based on the amount of sun) so the energy must be stored so it can be used in periods when there is no sun, like at night or on cloudy days.

Alternatively, overbuilding is another solution. This involves building an excess of solar panels so that even on a cloudy day you can still obtain enough power to run a building for normal uses. While overbuilding is expensive, the excess capacity on sunny days can be used to power Bitcoin mining. This can be set up to run for a few hours a day since it is usually sunniest during the midday hours.


However, there are several weaknesses of this method to consider. For example, there is electronic waste from excess capacity of computers since the computers Bitcoin runs on won’t be used until the peak energy production times of the day. It might be more effective to power cryptocurrencies that are inherently greener with this method, as opposed to powering Bitcoin, because using renewable energy doesn’t solve the root problem of Bitcoin’s mining system being very wasteful. An additional problem is that this method might not scale since the more Bitcoin miners there are in the ecosystem, the more returns from mining fall. A company might build Bitcoin-mining rigs attached to solar plants and try to recoup some costs for the build through the gains from the mining process. However, they might end up with financial returns that are much lower than expected if many other companies choose to do the same thing. If these utility companies that build these mining/solar rigs lose money on the build, then it could even cause the solar industry to potentially fall apart.


Another option is to model Bitcoin after other cryptocurrencies that are more stable and less energy-wasting. One alternative that many other cryptocurrencies are following is switching from a proof-of-work mining process to a proof-of-stake network. In proof-of-stake models, owners are the ones to create blocks instead of miners so only those who own some of the currency can validate transactions, also called staking. This means there is no longer a need for machines that use up high amounts of energy to produce hashes for the mining process, which significantly improves sustainability.

List of cryptocurrencies - some are greener than others

Some greener cryptocurrencies

Cardano is the most staked cryptocurrency that runs on a proof-of-stake blockchain network, where people buy tokens to join the network. Because there are only so many owners of the cryptocurrency, the built-in limit means there's no economic incentive to add more computing power, which prevents the staking system (the proof of stake version of the mining system) from getting out of hand. In addition, this means there are significantly more transactions within a given period of time, plus less electricity used overall: 6 GWh of energy per year compared to Bitcoin’s 121 TWh.


Polkadot has trusted validators perform the staking process, with a parallel processing system where its parachains (its form of blockchain) can interact with each other. This system is noted to have the potential to work more efficiently than the blockchains of Bitcoin and Ethereum.

Nano is a cryptocurrency that has removed the staking process altogether. It follows a protocol called Open Representative Voting where a consensus is achieved by specific representatives (known as “Nodes”), voting on the validity of blockers shared on the Nano network. Nodes have different levels of voting power depending on the number of Nano coins held.

Bitcoin is the current dominate cryptocurrency, but greener options may be the future

Bitcoin’s environmental impact is no small thing, and it is clear that its mining process needs to be improved to be more green. While there are methods to potentially lessen Bitcoin’s negative impact, such as turning to renewable energy or changing the current proof-of-work system, there is still a lot of work that needs to be done. As you look into getting involved in the Bitcoin ecosystem, also consider some of the cryptocurrencies that are paving the way for a greener digital currency landscape.

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