The Cambridge Bitcoin Electricity Consumption Index estimates that Bitcoin’s electricity consumption right now is 98.65 Terawatt-hours per year. https://cbeci.org/
For comparison, Australia’s yearly electricity consumption is around 180 Terawatt-hours per year.https://www.aer.gov.au/wholesale-markets/wholesale-statistics/annual-electricity-consumption-nem. This means that mining Bitcoin uses as much electricity as half of Australia (!!!).
So what?
Well, in order to use electricity you have to generate it in the first place, and almost every method for generating electricity causes waste. Oftentimes, this waste is carbon dioxide and nitrogen oxide, which can get trapped in the earth’s atmosphere. These trapped gases are generally accepted to be bad for the environment.
Note: It is important to mention that electricity from renewable sources is cheaper than non-renewable sources, so Bitcoin miners are incentivized to find as much renewable energy as possible. The breakdown between renewable and non-renewable energy sources for Bitcoin miners is unknown, but I would imagine if renewable energy sources were available the miners would be taking advantage of them.
Ok! We have established Bitcoin mining uses a ton of electricity and this is bad for the environment.
Now why does Bitcoin use so much electricity? We’re going to have to dive deeper into the technical details here, so buckle up!
Bitcoin uses so much electricity because it uses an algorithm called Proof of Work to run. Proof of Work means that every Bitcoin miner is running computations (or hashes) constantly to try to find the correct random number (or hash). When they find it, they get to mint the next block and they receive miner rewards. This means that Bitcoin miners have to run a ton of computations in order to be rewarded, which is what uses so much electricity.
So mining Bitcoin using Proof of Work could definitely be considered to be bad for the environment, but approximately 99.9% of NFTs aren’t minted on Bitcoin. They are minted on Ethereum. Hmmm, so how do things work on Ethereum?
Right now, Ethereum also uses this Proof of Work model (tons of computation -> tons of electricity -> bad for the environment) algorithm, but will be switching to a more efficient model called Proof of Stake in the next 6 to 12 months.
Proof of Stake solves the computation problem by randomly choosing a node to mint the next block rather than using random number computation. This means the Proof of Stake model is VERY friendly toward the environment. If you are ok with using computers to surf the web, then you are ok with Proof of Stake blockchains.
And now the final piece, what about NFTs on the Internet Computer?
Well, the Internet Computer is a blockchain that uses a Distributed Notary model (similar to Proof of Stake). This means that NFTs on the Internet Computer are just as friendly as NFTs minted using a Proof of Stake model, which if you don’t remember, is very friendly.
Here’s a nice summary if you are looking for something to copy/paste to a friend.
Why NFTs on the Internet Computer are not bad for the environment:
- Bitcoin uses Proof of Work
- Proof of Work uses a ton of electricity/computation, which is bad for the environment
- However, Proof of Stake is extremely friendly to the environment compared to Bitcoin
- Ethereum uses Proof of Work but will switch to the more energy efficient Proof of Stake in the next 6-12 months
- The Internet Computer uses a Distributed Notary model (similar to Proof of Stake)
- NFTs on the Internet Computer are extremely friendly to the environment
