Below is a chart and brief excerpt from today's Early Look written by REITS analyst Rob Simone.
The Bitcoin Mining Council (BMC) was formed in early 2021 and began aggregating data from the major players in the industry. Bitcoin mining consumes an estimated ~12bps of the world’s total annual energy production (see figure below), and the industry is focusing on and gradually eating into the 50k TWh of wasted or “stranded” energy being produced but not used.
Estimates are that ~60-65% of the energy consumed by global Bitcoin mining is from renewable or sustainable sources, and efforts are underway industry-wide to increase that penetration. China’s ban of Bitcoin mining will likely be additive to that process given that country’s heavy reliance on coal-generated power.
Now turning to the question of “why does Bitcoin consume so much energy?” Put simply, Bitcoin Application-Specific Integrated Circuit (ASIC) miners use electrical energy to perform computational work and solve cryptographic puzzles, ordering and assembling transactions into the popularized “blockchain.” In doing so the miners perform the “security work” needed to maintain the network and thwart outside attacks such as censoring transactions, re-ordering the blockchain, producing empty blocks, etc., any of which would likely render the network worthless as a way to immutably store value.