Is blockchain a climate killer?Blockchain often gets a bad reputation in the media for being a "power guzzler". Is that true? In the following, the VDT working group "Cryptocurrency" takes a closer look at this prejudice.

According to the Digiconomist platform, the Bitcoin network consumed a total of around 135 TWh per year as at 11 July 2021. This is roughly equivalent to the electricity consumption of Sweden. (see: https://digiconomist.net/bitcoin-energy-consumption/). Why is that the case? The Bitcoin network works according to the so-called consensus method Proof-of-Work (PoW) . For "mining", a complex calculation task is solved by computers, whereby transactions are confirmed on a blockchain and new blocks are added. This requires high computing power and consumes a lot of energy. It is therefore understandable that the cryptocurrency Bitcoin has been labelled an energy sin.

But it is important to emphasise that 40-70% of Bitcoin mining is done using renewable energy (see: https://hbr.org/2021/05/how-much-energy-does-bitcoin-actually-consume). A report by the Federal Ministry for Economic Affairs and Energy shows that blockchain technology can be used to promote renewable energies. (see: https://www.digitale-technologien.de/DT/Redaktion/DE/Downloads/Publikation/SSW_Energierevolution_getrieben_durch_Blockchain.pdf?__blob=publicationFile&v=12).

In addition to the PoW process used by the Bitcoin network, there are other consensus processes in use in blockchain networks that require less energy, such as Proof-of-Stake (PoS). While the energy costs per transaction in the Bitcoin network are around 830kWh, they amount to 30mWh for a PoS network such as Tezos. (see https://cvj.ch/fokus/hintergrund/klimabilanz-der-blockchain-technologie/).

To summarise: It is important to differentiate which cryptocurrency/blockchain we are talking about. The statement "blockchain is a climate killer" is certainly true for the Bitcoin network, but does not apply to all cryptocurrencies and blockchain solutions. (Publication date 14/07/2021)