Why cryptocurrency mining uses computing power

In Bitcoin and other proof-of-work cryptocurrencies, miners use computing power to compete to add the next block of transactions. They repeatedly calculate hashes – short digital outputs – until one meets the network’s target. This makes rewriting transaction history costly, while other participants can verify the winning hash quickly.

Proof-of-work mining uses electricity. Other cryptocurrencies use different methods to agree on blocks; Ethereum Mainnet replaced mining with proof-of-stake in September 2022.

How Bitcoin miners find a block

A cryptocurrency network needs a shared record of which transactions happened and in what order. In Bitcoin, miners assemble a candidate block of transactions and search for a valid proof-of-work. The block links to the previous one, building an ordered chain.

Mining hardware searches for a valid hash by calculating one from the block header, a compact set of information about the block. Miners change a value called a nonce and try again. A block qualifies only when its hash is at or below a target set by the network. Because hash outputs are unpredictable, miners cannot know which attempt will meet the target. They improve their odds by trying more hashes.

Each hash attempt is like drawing a lottery ticket: more attempts improve the chance of finding a winner, though no single attempt guarantees one. In Bitcoin, specialized machines called application-specific integrated circuits, or ASICs, perform these calculations. They are built for mining rather than general-purpose computing.

Finding a qualifying hash takes repeated attempts. Checking one is quick: a node hashes the proposed block and compares the result with the target. Nodes also check that the block’s transactions follow the network’s rules. Mining proposes a block; it does not replace the independent checks that other participants perform.

How proof-of-work protects history

Once nodes accept a block, later blocks build on it. To change a transaction in an older block, an attacker would need to create a replacement block with valid proof-of-work, then do as much work as the accepted chain. As more blocks follow, replacing that history requires more computing work.

This makes certain attacks costly, but it does not make them impossible. Bitcoin’s security depends in part on the assumption that honest participants collectively control more computing power than an attacker. If an attacker gained enough power, the risk of disrupting the chain would rise. The protection therefore depends on how computing power is distributed across the network.

Bitcoin also adjusts mining difficulty so blocks continue to arrive near the protocol’s intended pace as computing power changes. It recalculates the target every 2,016 blocks, using timestamps from the previous period. When miners add more computing power, the competition becomes harder after the adjustment rather than allowing blocks to keep arriving faster indefinitely.

Why proof-of-work uses electricity

Mining hardware must stay powered while it tries hashes. More computing power means more attempts, and the network’s competition encourages miners to run efficient machines at scale. This competition selects block producers and makes rewriting history expensive, so electricity use is part of proof-of-work’s security design.

Cambridge’s Digital Mining Industry Report 63 estimated Bitcoin’s electricity consumption at an annualized rate of 138.2 terawatt-hours as of June 30, 2024, and 183 terawatt-hours as of December 31, 2024. Over the same period, the report also estimated the network’s computing power. The electricity estimates project a rate at those dates; they are not meter readings of electricity used over full calendar years.

The estimates also show why more efficient hardware does not automatically reduce total consumption. A machine can use less electricity for a given amount of computing while the network’s overall use rises as more machines join. Cambridge estimates consumption because it cannot directly measure every miner’s power use. Its results depend on assumptions about hardware, electricity costs, and miner profitability.

What Bitcoin miners earn

Bitcoin miners can earn a block reward for an accepted block, along with the transaction fees included in it. Those payments give miners an economic reason to supply computing power. Each miner weighs expected revenue against electricity, equipment, and operating costs.

Mining pools let participants combine their computing power and split the proceeds based on how much work each contributes. Pooling reduces the ups and downs in an individual miner’s payments, though it does not remove the costs of running mining hardware.

How proof-of-stake differs

Mining is not required by every cryptocurrency. Proof-of-stake networks use validators who commit cryptocurrency to help secure the network and agree on blocks. They do not use a race to find hashes as their block-production method, though each protocol has its own rules and security trade-offs.

Ethereum Mainnet moved from proof-of-work to proof-of-stake on September 15, 2022. Ethereum’s own estimate says the transition reduced its energy consumption by about 99.95%. The estimate applies to Ethereum’s transition and does not establish an energy reduction for other cryptocurrencies.