Cryptocurrencies such as Bitcoin use huge amounts of electricity. In 2021, the Bitcoin network consumed upwards of 100 terawatt-hours, more than the typical annual energy budget of Finland.
Proof of stake offers a way to set up such a network without requiring so much energy. And if all goes as planned, Ethereum, which runs all sorts of applications in addition to the world’s second-largest cryptocurrency, will transition to it in the first half of 2022. The shift has been projected to cut energy use by 99.95%.
Cryptocurrencies run on blockchains—digital ledgers of transactions that must be secure from cheats, fraudsters, and hacks. Bitcoin and Ethereum currently ensure that security using proof-of-work algorithms: “miners” solve cryptographic puzzles, competing for the right to verify a new block of transactions. Successful miners are rewarded for their work with cryptocurrency.
Finding solutions to proof-of-work puzzles requires massive amounts of computing power and, thus, electricity.