Cryptocurrencies, like Bitcoin, Ether or Litecoin, are useful for decentralized money transactions between two digital wallets (people or entities) and they are revolutionizing the monetary system. However, the global energy needed to create them could rival the total electricity consumption of Argentina, a country of 40 million.

Blockchain diagram. Source: bitcoinmagazine.com

Cryptocurrencies use blockchain technology to perform transactions. Blockchain technology is an open, decentralized database. Cryptocurrency is a public decentralized ledger that, through its transparency, creates trust among the users because there is no central authority (a bank, for instance) controlling the flow of data.

How it Works

All transactions with the same cryptocurrency are recorded in a block and every transaction is secured by a cryptography key. For that block to be added to the total currency chain — thereby confirming the transaction — powerful computers called “miners,” which constantly guess mathematical equations, are needed to try and solve the same mathematical puzzle. The first miner that solves the puzzle adds a block of transactions to the public ledger. Every ten minutes or so, someone solves the puzzle and is rewarded with some cryptocurrency. Then, a new puzzle is generated, and the whole thing starts over again.

Energy Cost

In order to keep digital currencies alive, thousands of computers are needed for mining cryptocurrency networks (blockchains). Their work, according to experts, already exceeds the energy consumption of entire countries.

According to Morgan Stanley analysts headed by Nicholas Ashworth, Bitcoin miners and other cryptocurrencies may need 140 terawatts per hour of electricity this year. The above is about 0.6% of the world total. In addition, they highlighted that the figure is more than the estimated energy demand of electric vehicles in 2025.

"If the cryptocurrencies continue to appreciate, we estimate that the global consumption of 'mining' energy will increase," Ashworth said.