Blockchain protocols and their energy footprint
In recent months, the notion that blockchain technologies and crypto-assets consume excessive amounts of electricity has been at the center of discussions. In its previous article onthe environmental impact and challenges of blockchain technologies, ADAN provided a nuanced perspective on the debate regarding the energy consumption of various blockchain networks and noted that the energy requirements of these technologies depend on their consensus protocol and the number of network users.
Furthermore, the energy consumption of a blockchain protocol should not be equated with its environmental footprint. In fact,many use cases involving blockchain technologies and crypto-assets tend to improve the environmental footprint of these decentralized networks, particularly by utilizing surplus carbon-free energy in certain geographic regions where electricity demand is lower than production levels.
The proposed classification presents the energy consumption of the major public blockchain networks based on the protocol on which they operate. This demonstrates that no general conclusions can be drawn and that a granular analysis, based on the technological characteristics of these networks, is necessary[mfn]Estimates derived from this classification should be interpreted with caution. Due to the numerous studies conducted on the energy consumption of crypto-assets, results may vary depending on the methodologies used.[/mfn].
The energy footprint of blockchains
The claim that blockchain project developers do not take into account the environmental impact of energy consumption is debatable:
- Among the 10 largest blockchain networks, the vast majority have adopted a validation protocol that consumes very little electricity. Most project leaders are implementing decarbonization strategies, and some aim to achieve carbon neutrality.
- While some protocols (notably Bitcoin) consume a significant amount of energy, the energy used to validate transactions is, in many cases, renewable.
The crypto-asset industry consumeslessenergythan traditional industries.
Numerous initiatives are emerging to reducethe energy consumption of blockchain networks.
Energy consumption of cryptocurrencies
This article aims to examine the environmental footprint of the major blockchain networks within the digital asset ecosystem. The following protocols were selected for the purposes of this article:
- Bitcoin (BTC)
- Ethereum (ETH)
- Cardano (ADA)
- Binance Smart Chain (BNB)
- Solana (SOL)
- Polkadot (DOT)
- Dogecoin (DOGE)
- Algorand (ALGO)
- Polygon (MATIC)
- Tezos (XTZ)
- Iota (MIOTA)
Bitcoin (BTC)
Consensus Protocol: Proof-of-Work (PoW)
Hash function: SHA-256
Energy consumption per transaction[mfn] Data on energy consumption per transaction in a blockchain network does not perfectly reflect the energy consumption of these technologies. However, such data makes it easier to compare different blockchain networks, regardless of their consensus protocol. Data on energy consumption per transaction is sourced fromthe TRG Data Center study[/mfn]: significant (estimated at approximately 707 kWh)
The Bitcoin network's annual energy consumption is estimated to be between90 TWhand160 TWh, depending on the studies and methodologies used.
However, it is important to note that the Bitcoin network’s energy consumption does not reflect its environmental footprint. In fact, accordingto the Cambridge Bitcoin Electricity Consumption Index (CBECI), an increasing share of Bitcoin’s total electricity consumption comes from renewable sources (hydro, solar, and wind). Arecent surveyby the Bitcoin Mining Council confirms this finding and reveals that 56% of the energy used in mining is renewable.
Mining effectively regulates the electricity production market by utilizing surplus renewable energy from certain isolated geographic regions (Kazakhstan, Russia, El Salvador, and others). In this context, the Bitcoin network optimizes the ratio between energy consumption and production and reduces the risk of energy waste worldwide.
Finally, the Bitcoin network’s energy consumption is highly variable, and numerous events can indeed cause the computational power required for block validation (hashrate) to fluctuate.The recent exodus of Chinese miners, in particular, led to a drop of more than 50% in the hashrate.
Ethereum (ETH)
Consensus Protocol: Proof-of-Work (PoW)
Hash function: Ethash
Energy consumption per transaction: high (estimated at approximately 62.5 kWh)
The Ethereum network’s annual energy consumption is estimated at74.6 TWh. Although Ethereum currently still operates on a Proof-of-Work (PoW) system, the transition to Proof-of-Stake (PoS) is underway. This transition—known as “The Merge”—is expected to be completed in the first quarter of 2022 and will bring about numerous improvements that have been theorized for several years. With this in mind, members of the Ethereum community have attempted to calculate Ethereum’s energy consumption following the transition to PoS. They estimate thatthe Ethereum network will consume 99.95% less energy after this transition.
Thus, while there is no statistical study yet on Ethereum’s future energy consumption, it is undeniable that the transition to Ethereum 2.0 will significantly reduce it.
Cardano (ADA)
Consensus Protocol: Proof-of-Stake (POS)
Energy consumption per transaction: negligible (estimated at approximately 0.5479 kWh)
Cardano is an energy-efficient blockchain. Thanks to the use of Proof of Stake (PoS), theCardano networkconsumes an average of only 6 GWh of energy per year. Cardano’s annual energy consumption is comparable to that of two power plants. While this consumption may seem significant at first glance, a large proportion of validators use renewable energy to keep the network running.
Binance Smart Chain (BNB)
Consensus Protocol: Proof-of-Stake Authority (PoSA)
Energy consumption per transaction: negligible
The Binance Smart Chain is a loosely decentralized network (i.e.,consisting of only 21 validator nodes to ensure the network’s operation) that supports the development of decentralized finance projects (i.e., often referred to as CeDeFi).The BSC operates on the PoSA consensus mechanism, so its energy footprint is relatively low compared to other blockchains.
PoSA shares similarities with Proof-of-Authority (POA), which grants a limited number of pre-designated participants the power to validate transactions and update the distributed ledger. Unlike the Proof-of-Work protocol, Proof-of-Authority is characterized by its low electricity consumption but also by its high degree of centralization among a limited number of network validators.
Solana (SOL)
Consensus Protocol: Proof-of-History (PoH)
Energy consumption per transaction: negligible
ThePoH mechanismunderlying the Solana blockchain protocol allows nodes on the Solana network to validate transactions without requiring the computational power of PoW. Thanks to this consensus mechanism,the Solana network stands out for its high performance in terms of scalability.
Polkadot (DOT)
Consensus Protocol: Nominated Proof-of-Stake (NPOS)
Energy consumption per transaction: negligible
The Polkadot blockchain operates on a nominated proof-of-stake protocol, in which nominators support validators by staking their own assets in the network.
Although no official data has been released to date, it appears that the Polkadot blockchain, which does not rely on the computational power of its validators, consumes less energy than other blockchains based on Proof of Work.
Members of the Polkadot community estimate that the network consumes approximately 0.8 GWh per year.
Dogecoin (DOGE)
Consensus Protocol: Proof-of-Work (PoW)
Hash function: scrypt
Energy consumption per transaction: negligible (estimated at approximately 0.12 kWh)
The transaction validation algorithm used by Dogecoin is Scrypt. This algorithm requires less computing power than SHA-256.
Although Dogecoin does not consume as much energy as Bitcoin and Ethereum, transaction validation via Proof of Work still requires a certain amount of energy.
Algorand (ALGO)
Consensus Protocol: Pure Proof-of-Stake (PPOS)
Energy consumption per transaction: negligible
Thanks to the use ofPPOS, the Algorand network consumes very little energy to operate. Network users are randomly selected (based on their investment in the Algorand ecosystem) to propose blocks and validate them. This means that any network user can be chosen to participate in the network’s operation.
Algorand aims to be the first blockchain network to achieve carbon neutrality. The Algorand ecosystem is committed to making its network fully carbon neutral. Algorand has partnered with ClimateTrade to offset the small amount of carbon emitted by the Algorand network and makeAlgorand the first carbon-neutral blockchain network.
Polygon (MATIC)
Consensus Protocol: Proof-of-Stake (POS)
Energy consumption per transaction: negligible
Polygon is an Ethereumcommit chainthat enables the development of blockchain protocols compatible with the Ethereum network using Proof of Stake (PoS) as the consensus mechanism.
Polygon claims that, thanks to POS, the Polygon blockchain consumes only 0.00079 TWh annually.
Tezos (XTZ)
Consensus Protocol: Proof-of-Stake (POS)
Energy consumption per transaction: negligible
Tezos is a programmable blockchain, much like Ethereum. However, the Tezos blockchain currently consumes less energy due to its use of Proof of Stake (PoS) as its consensus protocol.Tezos estimates that its energy consumption is equivalent to 0.00006 TWh/year,which would make it one of the most environmentally responsible networks in the ecosystem.
IOTA (MIOTA)
Consensus Protocol: Tangle
Energy consumption per transaction: negligible (estimated at approximately 0.00011 kWh)
The IOTA consensus protocol is completely different from what we see in Bitcoin or similar blockchains.
The Tangle operates using directed acyclic graphs (DAGs) and allows network users (who submit transactions) toparticipate directly in transaction validation.As a result, transaction validation on IOTA requires very little computing power.
