There's a very ugly secret behind Bitcoin (and most other cryptocurrencies) that no one dares speak of. The Bitcoin network consumes an obscene amount of energy in relation to the number of transactions it processes. It's completely unsustainable.

Before I get into this, let me say that I am a cryptocurrency enthusiast. I want a world where all transactions are peer to peer, instantaneous, and free. But I know that what we are doing right now with Bitcoin will not provide this solution. We need a better solution, and the sooner we create it the better.

We're all getting pretty excited about Bitcoin right now, but few people realise the energy costs of the Bitcoin network.

First, let's look at some numbers (correct at the time of writing, 20 Nov 2017).

The current hash rate is around 10 million TH/s.

The most energy efficient miner you can buy today is the Antminer S9, which has a hash rate of 14 TH/s, at a power consumption of 1.37kW.

The Bitcoin network currently processes around 300,000 transactions per day. There are 86,400 seconds in a day, so that's around 3-4 transactions per second.

If we assume that all current mining is being carried out by the most efficient mining hardware (which it isn't), then the current energy expenditure of the Bitcoin network can be calculated as follows:

10,000,000 (hash rate in TH/s) / 14 (S9 hash rate) * 1.37 (S9 power consumption)

This comes out to 978MW

A typical home in north America consumes an average of 3-6 kW. That means the current energy consumption of the Bitcoin network is the equivalent of nearly 200,000 homes.

Think about that for a minute. We've created a machine which uses almost a gigawatt of power to process 3-4 payment transactions per second .

Another way of looking at this is on a cost per transaction basis. This 'machine' needs to run for 250mS for each transaction. During that time, it will consume 250MJ of energy. That's the energy stored in over 7 litres of gasoline. And that's to carry out one single transaction on the Bitcoin chain.

Why are things this way? Proof of work is at the heart of how Bitcoin works. The democratic nature of Bitcoin is based on this.

There are many possible solutions to this, some of which are already being explored in other cryptocurrencies. Proof of stake and proof of burn are two such options. Off-blockchain approaches such as the lightning network are another option. Which one will work best, only time will tell.

One thing is clear. Bitcoin in its current state is, from an energy-consumption point of view, an abomination. A wider understanding of this issue is needed in order for us to start looking at and experimenting with alternative approaches that do not rely on proof of work.

Edit 28th Nov 2017

The response I've received to this article has been fantastic - thanks to everyone who has provided input.

I wanted to clarify one of my assumptions - the power consumption per TH, as this appears to have caused some confusion. The purpose of the calculation was to provide a lower limit to the power consumption. The 1GW value is the absolute lowest the power consumption of the Bitcoin network could be today.

It's impossible to know how efficient average (and by average I mean the mean value) mining hardware is, but we can be certain that it's not as efficient as the most efficient hardware you can buy today. A reasonable guess would be somewhere around 0.5 of the maximum efficiency. That would mean the energy consumption is more like 2GW.

Factoring in data center energy use (cooling), the total is likely to be around 3GW.