Does crypto have an energy problem?

Does crypto have an energy problem?

A report from Sygnum Bank on Bitcoin’s energy challenges and the emergence of green blockchains.

Bitcoin’s high energy consumption is an often used criticism against the world’s first cryptocurrency, often described by the media in a way that suggests that cryptocurrencies in general have an “energy problem”.

While Bitcoin is energy inefficient, solutions have been proposed since its earliest days to mitigate its energy consumption, including by its creator, “Satoshi Nakamoto”. Early innovations in this area yielded results, but ultimately it was the invention of an alternative consensus mechanism, Proof-of-Stake, that definitively solved the problem.

Technological solutions to Bitcoin’s high energy consumption have been available for some time now, and the fact that the market has neither pivoted away from Bitcoin to a Proof-of-Stake cryptocurrency, nor put any pressure on Bitcoin to upgrade its platform to be more energy efficient, is a sign that market participants to date have not been particularly concerned about the energy inefficiency of Bitcoin. Meanwhile, the majority of cryptocurrencies today use very little energy, and the second largest cryptocurrency, Ethereum, is changing its protocol to the energy efficient Proof-of-Stake mechanism.

In this report, we answer the question “Does crypto have an energy problem?”. We review the reasons for Bitcoin’s high energy consumption, look at energy sourcing flexibility, and analyse the innovative solutions the industry has found to address this problem.

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Disclaimer

This document is purely for educational purposes and has been issued by Sygnum Group. It is not intended for distribution, publication, or use in any jurisdiction where such distribution, publication, or use would be unlawful, nor is it aimed at any person or entity to whom it would be unlawful to address such a marketing communication. It does not constitute an offer or a recommendation to subscribe, purchase, sell or hold any security or financial instrument. It contains the opinions of Sygnum Group, as at the date of issue. These opinions and the information contained herein do not take into account an individual‘s specific circumstances, objectives, or needs. No representation is made that any investment or strategy is suitable or appropriate to individual circumstances or that any investment or strategy constitutes personalized investment advice to any investor. Therefore, you must verify the above and all other information provided in the document or otherwise review it with your external advisors. Some investment products and services, including custody, may be subject to legal restrictions or may not be available worldwide on an unrestricted basis. The information and analysis contained herein are based on sources considered as reliable. Sygnum Group uses its best efforts to ensure the timeliness, accuracy, and comprehensiveness of the information contained in this document. Nevertheless, all information indicated herein may change without notice.

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