Many cryptocurrency critics actively discuss the amount of energy that Proof of Work (PoW) mining uses. However, some supporters of cryptocurrency make the case that the problem of cryptocurrencies’ energy usage is overstated and misleading by using economic principles.

Work Output as a Measure of Energy Used

Everything you do in your day-to-day life requires a certain amount of energy. That energy could be measured by the number of calories you have to consume to maintain your body weight and carry out your daily activities. Over the centuries, our ancestors invented tools and machines to generate more work output for each calorie spent. The formation of clans could have been seen as an early precursor of mining pools, in that working together and sharing resources meant a better chance at out-performing rival clans.

The economic value of energy use stems from the fact that people are unlikely to waste large amounts of energy on activities that they do not perceive as having some benefit. Master craftsmen were often respected members of the community because they focused their energy on doing one thing well and could trade the fruits of their labor for other goods they wanted and/or needed. If their products did not sell, however, they were likely to move to another town that needed their services or quit pursuing their trade altogether,  due to the fact that it wasn’t worth it if they could not benefit from their work.

Cryptocurrency mining works on a similar conceptual level. Energy is turned into Bitcoin using a special computational tool known as a mining rig, or ASIC. Owners of mining rigs may share their resources in mining pools for a better chance of striking it rich by being the first group to compute a block. Some miners may prefer to check to see which cryptocurrencies are the most profitable to mine with the setup they can afford, creating a form of “specialization” within the mining community.

PoW Is a Feature, Not a Bug

In an unscientific Twitter poll I created, roughly 73% of the first 56 voters did not think the energy used for cryptocurrency mining was a waste. The comments indicated that some people believed that mining, though energy-intensive, was not a net waste because there is a trade-off between efficiency and security. Miners may prefer to set up shop in areas where energy is cheap or generate their own electricity. However, in their view, the energy is not wasted because it is turned into something that can be redeemed for other valuable resources.

Satoshi Nakamoto deliberately incorporated SHA-256-based PoW into Bitcoin to make it difficult to mine and costly to attack. PoW was originally conceived as a way to combat abuses of network and digital services, the theory being that DoS attackers and spammers were less likely to conduct a successful operation if they had to buy flops in order to do so. Incidentally, each flop is a unit of computing power that takes energy to power. Satoshi Nakamoto, the pseudonymous creator of Bitcoin, simply adapted the concept to digital currencies in order to build in the extra value of having to spend energy to validate transactions on the Bitcoin network.

Demand for Energy Not Necessarily a Bad Thing

According to Malthus’ economic theories, there are only so many resources to go around and it is not possible to increase the amount of those resources, even if the demand for those resources exceeds the supply. However, Malthusian theories ignore the fact that advances in technology not only permit the human population to tap new resources but also make more efficient use of existing resources.

In terms of the energy used for mining, the problem is not that there is only so much energy to go around. If society was limited only to fossil fuels for energy, there might be a problem as the demand for energy is driven upward by activities like mining.

One may recall, though, that cryptocurrency miners are not against using renewable energy sources, like solar power and geothermal energy, if it is the cheapest available that is. Demand for cheap renewable energy is more likely to encourage investment in solar and wind farms, hydroelectric operations, and nuclear power plants than any noisy protests from activists ever will. Current estimates show that nuclear power is likely to be the most scalable due to the fact that its only limitations are the potential for human error and access to seawater for safety purposes.

The most interesting figure is that current mining activities only cost US$4.5 billion annually, but mining already powers $1.34 trillion in annual “trustless” settlements that are made possible by cryptocurrency. From an economic standpoint, that is not a net loss.


  1. Sure, if you only look at your own interests and the sole reason you are invested in crypto currencies is because of your profit, then it is easy to justify the energy cost in a positive manner that will protect your interest.

    But if you look at it from an objective point of view, the minning is a complete waste of time, energy and limited earths resources. And completely unnecessary. All of that could be used elsewhere, because we already have a better solution, which of course is PoS.

  2. Agree with that 100%. We’re living in a time where pollution is getting critical more and more. We’ve to reduce the CO2 output and what does mining do? It increases the CO2 output for some digital tokens wich is completely unnecessary. But its the same with Volkswagen or Nestle – gaining money justifies the pollution of our earth.


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