blockchain energy consumption
Are you a brand interested in how blockchain technology can bring transparency to your supply chain? One example is the DAG (Directed Acyclic Graph), which does not require any miners. In: Proceedings of the thirteenth eurosys conference, pp 1–15, Beck R (2018) Beyond bitcoin: the rise of blockchain world. In: Proceedings of the 52nd Hawaii international conference on system sciences, Lockl J, Schlatt V, Schweizer A, Urbach N, Harth N (2020) Toward trust in internet of things (IoT) ecosystems: design principles for blockchain-based IoT applications. The utility world has always been an ideal target for the use of blockchain technology and this is even more true for the energy sector where there are unique subjects and cases, such as micro-producers, “prosumers” (producers and consumers at the same time), smart grids and a series of incentives linked to renewable sources.. It takes more computations to store or retrieve a record from a blockchain compared to traditional data stores. Bigger picture. 3, we put these results into perspective by presenting blockchains with alternative consensus mechanisms. This would enable higher transaction rates without a noticeable increase in energy consumption. If someone wants to transact directly on a blockchain, energy costs can rise quickly. Use blockchain to spur energy-efficient transportation methods. Johannes Sedlmeir. The first and most widely expected to succeed is an alternative to Proof of Work called Proof of Stake (PoS). On the other hand, Ethereum was designed to prevent the use of highly specific mining hardware, so general-purpose GPUs can be used for mining. A … To justify the validity of our upper bound, we argue that the energy consumption associated with maintaining the nodes, mining excluded, is, in fact, negligible compared to the energy consumption of mining for today’s major PoW blockchains: To validate a single block in today’s cryptocurrencies, every node must typically download up to a few Megabytes of data and perform as many as several thousand hash computations, as well as a comparable number of corresponding computations and database operations. Blockchain energy consumption is affecting supply chains as a result of the number of computations required to execute a process and the time it takes to complete a transaction, but adopting the technology to improve transparency and auditability could still be worth it, according to experts. Copyright © 2013-2021 Project Provenance Ltd. All Rights Reserved. Get in touch here. Recent developments in. PubMed Google Scholar. Opinions expressed by Forbes Contributors are their own. 2, this is not an ideal metric for PoW blockchains but does correctly represent the order of magnitude. However, Bitcoin still dominates many people’s perceptions of blockchain technology. This refers to the right to create a new block from a subset of queued transactions when one finds a solution to a cryptographic, computationally intensive puzzle. The reward typically consists of a certain amount of the associated cryptocurrency and the fees for the associated transactions. For permissioned blockchains, this might be particularly relevant when enterprises have to decide for or against a particular blockchain implementation. energy consumption}\times \text{min.electricity price.} Strikingly, such blockchains are “energy-intensive by design”. During the blockchain process proof-of-work (PoW) has to be maximized and this PoW chains rely on … On the other hand, if electricity prices generally dropped by 50%, e.g., due to decreased demand or increased feed-in of renewables, or a rush for cryptocurrencies led to an increase of their prices by 100% and, therefore, to a level that we have already observed by the beginning of 2018, our upper bound would double in each of the scenarios, and even quadruple if both happened to occur at the same time. For example. The main result of the discussion about blockchains with alternative consensus mechanisms is that, by getting rid of energy intensity by design, their energy consumption is orders of magnitude lower compared to PoW-blockchains. **The minimum is calculated from the total network hashrate, assuming the only machine used in the network is Bitmain’s Antminer S9 (drawing 1,500 watts each). Trade-offs in distributed ledger technology designs. Moreover, the total market capitalization for all other PoW cryptocurrencies is significantly lower than that of Bitcoin itself. *The assumptions underlying this energy consumption estimate can be found here. Great Scott! A typical non-blockchain, centralized system in applications will use a more complex database and backups, thus mildly increasing the energy consumption. The probably best-known alternative for the permissionless systems required for cryptocurrencies and other open decentralized applications is the so-called Proof-of-Stake (PoS) consensus mechanism. 02/15/2021 ∙ by Johannes Sedlmeir, et al. One can also determine an upper bound for the energy requirement of the mining process for a PoW blockchain, assuming honest and rational miners whose utility from mining is solely financial profit: Participation in the mining process is only profitable as long as the expected revenue from mining is higher than the associated costs: A few easy manipulations yield the desired upper bound: As hardware costs represent a substantial part of the costs side, and electricity prices vary significantly around the globe, we cannot assume that the upper bound is very tight. Finding a good compromise between these interests could enable a reduction of the total workload in the system, and, therefore, a reduction of its total energy consumption. Three areas of research show promise here. MIS Q Exec 18(4):221–243, Kannengießer N, Lins S, Dehling T, Sunyaev A (2019) What does not fit can be made to fit! We categorize PoW, hybrid and PoS as high, medium and low energy consuming blockchain consensus protocols. One perspective to take is that it is easy to estimate Bitcoin’s energy consumption by looking at “how hard” the miners have to work. Finally, in some cases it may not be necessary to use a distributed ledger at all. Of all the potential implications of blockchain for the energy sector, the energy use of cryptocurrencies – and bitcoin in particular – has captured the most interest. This article challenges the common prejudices regarding the energy consumption of the supposedly homogeneous blockchain technology by providing a detailed analysis of current scientific knowledge. On the other hand, for small networks, redundancy does not add much absolute energy consumption, particularly when compared to the scale of PoW blockchains’ energy consumption. Average energy consumption for a Block Producer is 1,8KW for 24 hours. Blockchain technology entered public awareness with its first application, the cryptocurrency Bitcoin (Nakamoto 2008), which was established in 2009 and currently exhibits a market capitalization of more than 100 billion USD. 6. How easily sharding can be achieved largely depends on the consensus mechanism. Research into technologies that maintain a distributed ledger without requiring a blockchain will also lead to energy efficiencies. However, we also argue that the energy consumption associated with a widespread uptake of PoW cryptocurrencies is not likely to become a major threat to the climate in the future. Therefore, 1.8KW x 24 x 74 = 3196 kWh per day. With the help of this mechanism, the probability of being selected is linked to the amount of cryptocurrency that the node has deposited and locked (“staked”) for this purpose. Joule 2(5):801–805, Dittmar L, Praktiknjo A (2019) Could bitcoin emissions push global warming above 2\(^\circ\)C? Accordingly, a single transaction currently requires enough electrical energy to meet the needs of the average size German household for weeks, or even months. This enables distributed consensus while doing away with the need for energy to be wasted in Proof of Work calculations. Blockchain and energy consumption Hard to estimate. Ener Res Soc Sci 44:399–410, Vranken H (2017) Sustainability of bitcoin and blockchains. Yet, these bounds are very consistent in the case of all of the cryptocurrencies we investigated. However – as has already been pointed out in a critical ’Matters Arising’ response by Dittmar and Praktiknjo (2019) – when increasing the blocksize and, therefore, the throughput, according to our previous arguments, the energy consumption associated with mining would remain constant, and the energy consumption associated with the remaining tasks would still be negligible. \end{aligned}$$, $$\begin{aligned} \text{total power consumption}\le \frac{\text{block reward} \times \text{coin price} +\text{transaction fees}}{\text{avg. Entering the current numbers – retrieved from Coinmarketcap (2020) and Coinswitch (2019) on 2020-02-05 – into (1) yields a lower bound for power consumption of 6.8 GW, which equates to an annual energy requirement of at least 60 TWh. © 2021 Springer Nature Switzerland AG. 5, we illustrate our findings by a first rough comparison of the energy consumption of some non-blockchain, centralized systems to that of basic blockchain architectures. An evaluation should therefore not only compare performance metrics and energy consumption, but also take into account the unique opportunities offered by this technology. Accessed 05 Feb 2020, De Vries A (2018) Bitcoin’s growing energy problem. Blockchain has shown itself to be a vital part of new energy systems and may be one of the biggest forces in green tech going forward. Blockchain for energy. However, we are confident that solutions will be developed to realise the benefits of decentralized computing without the excessive energy consumption of current systems. Sherman Lee Contributor. Although the energy consumption of such a network will be negligible compared to Bitcoin, it will, therefore, remain high compared to a non-blockchain centralized system with minimal redundancy (i.e., because of backups). As mining turns energy into money on-site, location is not a constraint. These are referred to as permissioned blockchains. State … We have seen that for PoW blockchains, the energy consumption related to consensus outweighs the energy consumption associated with operating transactions, so the redundancy aspect is usually not discussed in detail. The role of consensus has already been discussed in Sect. We can save the environment simply by making more energy improvements," said Wozniak. Strikingly, such blockchains are ‘‘energy-intensive by design’’. The value of the former is proportional to the cryptocurrency’s market price, so the success of cryptocurrencies on financial markets in the last years has provided a very strong incentive to participate in mining. However, in enterprise applications, blockchains are typically only one part of a hybrid solution in which most processes are operated via conventional IT, and little information which is relevant to the remaining participants on the blockchain is processed on-chain (Rieger et al. The Solar Generation Company was founded in 2016 in California, USA, as a combination of innovative business concepts and an ambitious-technological proposition. A legitimate cause for concern in the use of public Blockchains is the significant environmental impact from the energy consumption required. We will not enter in this discussion up here but want to highlight that the outcome will likely decide which consensus-type for permissionless blockchains prevails and, therefore, impacts the energy consumption of future open decentralized applications. Even for a million nodes – and taking into account differences in efficiency between common and specialized mining hardware, given that ASICS can be millions of times more efficient than CPUs at computing hashes – the energy consumption associated with mining is still orders of magnitude higher than the energy consumption required to maintain the nodes (De Vries 2018). This would, however, be a tedious task, as one would have to collect specific parameters, such as block reward and average block time, for each PoW cryptocurrency, of which there are currently more than 1000. Blockchain represents a new approach applicable to all types of transaction, born out of virtual currencies such as Bitcoin and Ethereum. In summary, there are various ways to reduce the intrinsic redundancy of blockchains and, therefore, to reduce also their energy consumption. The more secure these PoA consensus mechanisms are, the greater their complexity and, therefore, the greater their energy consumption. It will also involve a discussion about the compromise between the degree of decentralization, security, performance, energy consumption, and further metrics which are of importance for blockchain-based use-cases. Hey Beauty, It’s Time To Lift The Lid On Ingredients And Impact, Why ‘Impact Proof’ Will Eat Brand Purpose For Breakfast In 2021, Open Data Systems for the Circular Economy, Dr. Jutta Steiner at OpenTech 2015 on the power of trustless networks, Why we’ve launched the Provenance Integrity Council, Transparency, standards and working with Europe in the post-Brexit world, Unilever is using geolocation data and satellite imagery to check for deforestation in its supply chain – CNBC, Princes adopts blockchain as part of its ‘proactive approach’ to illegal labour in Italian agriculture – Food Navigator, Princes turns to QR codes and blockchain for sustainability storytelling – edie, Responsible sourcing and palm oil – a #ProvenanceLive recap, Software vs. Agency: Why using tech is the best method for transparency. Bus Inf Syst Eng 1(5):400–402, Stoll C, Klaaßen L, Gallersdörfer U (2019) The carbon footprint of bitcoin. Considering the current discussions regarding climate change and sustainability, these statements could therefore inhibit or delay the widespread adoption of blockchain technology (Beck et al. We repeated the calculation of the lower bound (1) and the upper bound (2) for the remaining 4 PoW cryptocurrencies with market capitalization of at least 1 billion USD. Metering, billing and security. Nat Clim Change 9(9):656–657, Douceur JR (2002) The sybil attack. In fact, competition in the mining hardware market, resulting from the hype around cryptocurrencies, has dramatically increased the energy efficiency of mining hardware in the last decade. Our estimates calculate an energy saving of over 95% would be possible, although the data to support this is not yet clear [1]. Accessed 5 Feb 2020, Jensen T, Hedman J, Henningsson S (2019) How tradelens delivers business valuewith blockchain technology. Yet, this has some natural limits: Currently, transactions are operated “naively” on all nodes in the sense that all transaction-related data must be provided on-chain and all nodes recompute every step on their own. For bitcoin, blockchain’s most famous use case, this power usage has become hugely problematic. Popular implementations of such permissioned blockchains are Hyperledger Fabric and Quorum. On the other hand, we know from other areas of IT that significant energy savings can be enabled by process optimization and digitization. Generally speaking, blockchain technology permits secure transactions to be made without the involvement of intermediaries, and is, therefore, appealing to individuals as well as to industry and the public sector. Bitcoin, the first application built on blockchain technology, is a decentralized payment system in which all participating computers (“nodes”) store a copy – or, more precisely, a replica, since there is no distinguished master – of the associated ledger. This is because, the larger a block is, the longer it takes for it to be propagated by the worldwide blockchain network. For non-PoW blockchains, however, the energy consumption related to consensus is no more enormous, and, therefore, the contribution to total energy consumption by redundant operations may be significant. A simple server can operate transactions with very low energy consumption. The Provenance platform currently works on the Ethereum network, which is exploring PoS and as development continues, would present a viable solution to reduce energy consumption. Both the current hash rate of a public blockchain and the energy efficiency of the most efficient mining hardware can easily be retrieved from online material. A small-scale permissioned blockchain as used in cross-enterprise use-cases has a similar degree of redundancy, but some additional yet limited overhead due to, e.g., PoA consensus and more complex cryptographic operations. Hence, it is not only alternative consensus mechanisms that one should look at to further reduce the energy consumption of blockchain technology, but also concepts which allow reduced operation redundancy. A non-PoW permissionless blockchain with a large number of nodes can already exhibit a significantly increased energy consumption due to the high degree of redundancy. 4, we discuss this issue and also give an overview of methods and concepts which could further decrease the energy consumption of blockchain technology. In Proof of Work, miners are incentivised to produce valid data by the energy cost that is compensated. If a PoS or alternative non-PoW blockchain replaces Bitcoin or another PoW cryptocurrency in the future, we have to expect that there will still be tens of thousands of nodes. PoS has already been adopted by several blockchains [2][3][4] and is. Figure 1 displays the resultant ranges for their respective energy consumption: Market capitalization and the computed bounds on energy consumption for the 5 highest valued Proof-of-Work cryptocurrencies. mining revenue} \\&\ge \text{tot. In this example, the interpretation is that the network does not require any incremental energy beyond what user machines would already be using. 2018b; Rieger et al. By contrast, for large systems consisting of many nodes, the natural redundancy in a blockchain can lead to much higher energy consumption. This trade-off has already been discussed, e.g., in Bitcoin Magazine (2018). The pseudo-randomness typically comes from a subset of the previous blocks) that determines who is allowed to build (“mint”, “forge”, “bake”) and attach the next block. Determining the exact value for the energy consumption of a multitude of open, distributed networks is a hard task because the precise number of participants, the properties of their hardware, and the effort which they put into mining are unknown. On the other hand, the workload associated with redundant operations, e.g., the verification of new blocks, can be significantly reduced, which also mitigates the redundancy issue. Other blockchain applications potentally beneficial to renewable energy diffusion, energy efficiency and the reduction of energy consumption are being explored. A similar basic concept is the use of sidechains (e.g., Plasma for Ethereum). 2009). Some DAG based distributed ledgers are already in operation [5][6]. Note that (1) does not depend on any other parameters and, therefore, gives a very reliable lower bound. However, compared to a major Proof-of-Work blockchain, energy consumption is still negligible. Using this technology, we have managed to link plants where electricity is produced to specific points of consumption, allowing the source of the energy to be traced. In the long term, it is to be expected that even with groundbreaking innovation in the energy efficiency of mining hardware, Bitcoin’s and other PoW blockchains’ energy requirements will remain at the previous level unless the remaining economic quantities on the right-hand side of (2) change considerably. Accepted after two revisions by Ulrich Frank. Hence, we conclude that further investigation in this direction, which has many similarities to Vitalik Buterin’s “scalability trilemma”, might help to find the best compromise between performance, security, and energy consumption. Let’s discuss some of the disrupting use cases of blockchain energy. In turn, this has led to an enormous energy consumption associated with the underlying PoW blockchains. Blockchain platforms are often attacked in the media for their energy consumption. An … In a PoS blockchain, voting power is tied to the capital deposited by each node. while massively reducing energy costs with only a few machines required to host and audit the ledger. This gives a lower bound of the energy consumption of an arbitrary PoW blockchain: This estimate indicates the lower bound, reflecting the likelihood that more solutions are found than disseminated, that further computations – in addition to mining – are being carried out, and that not every miner has the most energy-efficient hardware. Accessed 05 Feb 2020, O’Dwyer KJ, Malone D (2014) Bitcoin mining and its energy footprint. In: Proceedings of the 11th international conference on management of digital ecosystems, pp 126–133, Eyal I, Sirer EG (2014) Majority is not enough: Bitcoin mining is vulnerable. In Sect. The number of U.S. households that could be powered by the energy expended on validating the Ethereum network for one day stands at 717,797. According to Androulaki et al. https://beincrypto.com/bitcoins-hash-rate-retraces-40-this-month-slips-under-100-ehash-s/. In practice, however, the blocks cannot be enlarged at will. This means that, overall, there would be no noticeable increase in total energy consumption. For such blockchains, a simple voting-based agreement process based on “one man – one vote” is not secure, since a potential attacker could simply create multiple accounts to gain a majority and take control of the system; this is called a Sybil attack (Douceur 2002). Compared to a global banking network with similar capabilities, but centrally controlled, this is a vastly higher energy requirement. Generally speaking, however, reducing the degree of redundancy also makes a blockchain network more centralized and must, therefore, be carefully weighed against concerns about security, liveness, and trust. Other participants have to follow suit with the competition. Compared to a global banking network with similar capabilities, but centrally controlled, this is a vastly higher energy requirement. The Blockchain World is acutely aware that bitcoin’s energy use is wasteful and in general looks for alternative ways of setting up a blockchain that doesn’t use a lot of energy. According to one widely cited website that tracks the subject, the Bitcoin … https://doi.org/10.1007/s12599-020-00656-x, DOI: https://doi.org/10.1007/s12599-020-00656-x, Over 10 million scientific documents at your fingertips, Not logged in In: 25th IET Irish signals & systems conference 2014, pp 280–285, Rieger A, Guggenmos F, Lockl J, Fridgen G, Urbach N (2019) Building a blockchain application that complies with the EU general data protection regulation. The relative energy saving potential is, however, negligible for PoW blockchains as the energy consumption of mining dominates all other contributions. 2019). All numbers given here should be taken with caution as they are highly dependent on the precise architecture, security measures, type of hardware, and other parameters. While it is fair to say that blockchain isn’t positive or negative for the environment, it didn’t take long for forward-thinking people to see its potential to enable much higher levels of resource use efficiency. THE PROBLEM WITH OFFSETTING | Need to know. https://coinswitch.co/news/top-10-best-bitcoin-mining-hardware-in-2020-latest-review-and-comparison. As an example of a small-scale enterprise blockchain, we refer to a Hyperledger Fabric architecture with 10 nodes, each on cloud instances with 32 vCPUs and therefore likely consuming a few thousand Watts in total. More computations relate to the speed required to execute a given process in a supply chain transaction. Ideally, however, all interim transactions are operated purely bilateral and do not involve a transaction on the corresponding blockchain. Nevertheless, we will stick to the common usage of the phrase here.) The hybrid consensus protocol generates significantly higher average returns than … A ledger is commonly defined as a collection of accounts, stating one’s current rights of ownership of a particular asset – in the case of Bitcoin, units of the eponymous cryptocurrency. Such channels usually require a transaction on the blockchain, in the course of which off-chain payment channels are created and terminated. Read by over 10,000 people in more than 30 countries. Open Access funding provided by Projekt DEAL. Proof of work. A manifestation of this fact could be observed when in the course of a general drop in financial markets due to the Corona pandemic, market prices for Bitcoin dropped by up to 40% in March 2020. You can check the index to get an instant look at the overall energy consumption of bitcoin, including the number of US households that could be powered by the bitcoin network, or the country that best matches the bitcoin network in terms of energy consumption. Nat Sustain 1(11):711–718, Labazova O, Dehling T, Sunyaev A (2019) From hype to reality: a taxonomy of blockchain applications. Joule 3(7):1647–1661, Truby J (2018) Decarbonizing bitcoin: law and policy choices for reducing the energy consumption of blockchain technologies and digital currencies. 2, we first provide some technical background for Proof-of-Work (PoW) blockchains and determine the level of their energy consumption. Download : Download high-res image (202KB) Download : Download full-size image; Fig. 2. Other cryptocurrencies, such as EOS, Tezos, and TRON – all of which feature in the Top 20 cryptocurrencies in terms of market capitalization – are already successfully using PoS. 2019). When talking about blockchain technology in academia, business, and society, frequently generalizations are still heared about its – supposedly inherent – enormous energy consumption. If, however, storage capacities (hard disks) and network speed continue to improve worldwide, a considerable increase in block sizes might be conceivable in the future. 2019). Theoretically. Get in touch here. However, retrieving green energy data securely and integrating it in the blockchain continues to be a major challenge. In particular, SNARKS, STARKS, and other (Zero-Knowledge-)Proofs of computational integrity which require much less verification and communication overhead on-chain seem very promising (Ben-Sasson et al. Some argue that getting rid of PoW’s energy consumption comes at the price of security, e.g., because one can only accrue voting weight (capital) from inside the system. Appl Innov 2:6–19, De Angelis S, Aniello L, Lombardi F, Margheri A, Sassone V (2017) Pbft vs proof-of-authority: applying the cap theorem to permissioned blockchain. This can have a negative effect for latency (the time it takes to distribute a new block to all nodes) and, also, security: More solutions to the puzzles are likely to be found as a certain block propagates through the network, splitting the honest miners’ resources and, therefore, leaving the network more vulnerable to attack. If you’re not familiar with blockchain technology, read our, A legitimate cause for concern in the use of public Blockchains is the significant environmental impact from the energy consumption required. However, one can also argue that PoS has less of a tendency to centralize (mining has economies of scale) and is, thus, more secure in the long run. In both estimates, we have, so far, only taken into account the energy consumption involved in mining, i.e., solving the cryptographic puzzles, and neglected the energy consumption of the other tasks which have to be performed on the participating nodes, mainly, validating new blocks and updating their local databases accordingly.