How Mining Coin Uses Electricity
The world is moving into the digital era, and with it comes virtual assets recorded in ones and zeroes. The Bitcoins, Ethereums, and countless other “crypto” currencies are created through an activity called mining, in which computers race to solve complex math problems that validate transactions on a public ledger known as a blockchain. The miners who solve these calculations are rewarded with crypto, but the process requires massive amounts of electricity. Now, large cryptomining operations are partnering with utilities to reimagine their energy use by consuming a mix of renewables and other resources to power their data farms. This has the potential to reduce their carbon footprint and help balance the nation’s growing demand for electricity.
Creating Bitcoin consumes 176 terawatt-hours per year, according to a 2021 study by the Cambridge Bitcoin Electricity Consumption Index, which is more than the Netherlands or Philippines uses annually. It would take nine years of household-equivalent electricity to mine a single bitcoin. The high costs make it unprofitable for anyone to buy and operate their own mining hardware, leading to an industry of cloud mining services where companies claim to rent out mining capacity for a fee.
As the popularity of cryptocurrency has grown, so too has the need for computer power to mine it. The process works something like this:
Each computer on the network is searching for the correct answer to a mathematical problem that will produce a hash value that matches with one in a group of approved transaction records called a block. When a miner finds this hash, they broadcast it across the network for others to verify. If all verification is successful, the miner is rewarded with new coins and the blockchain records the hash as part of its history. New coins are created as a reward for validating these transactions, but the total number of rewards will decrease over time. (Bitcoin rewards have already decreased twice, a process called a “block halving.”)
Cryptocurrency mining is critical to the success of any cryptocurrency system because it allows the decentralized technology to function without a central authority that keeps track of users’ balances. Instead, all participants agree to maintain and update a shared record of past transactions. Mining is the mechanism by which this consensus is reached, and it’s also how cryptocurrencies are maintained in the future.