The Energy Consumption of Bitcoin Mining and Potential for Regulation
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THE ENERGY CONSUMPTION
OF BITCOIN MINING AND
POTENTIAL FOR REGULATION
byJacob Huston
*
Perhaps one of the first and most famous transactions
made using the digital currency Bitcoin is the infa-
mous pizza purchase. In 2010, a Florida program-
mer allegedly bought two pizzas for 10,000 Bitcoins.1
Today the approximate value of 10,000 Bitcoins is just
about $69,000,000. Since its genesis in 2009 by an anony-
mous developer using the sobriquet Satoshi Nakamoto,
Bitcoin has come a long way.2 Bitcoin has often been dis-
missed as being similar to the speculative bubble of Dutch
tulip bulbs in the 1600s.3 Whether it is a speculative bub-
ble or not, the Bitcoin network continues to expand at a
rapid pace in both market capitalization and the comput-
ing power (hash power) used to secure the network. For
example, Bitcoin's market capitalization increased from
$64 billion on January 17, 2019, to over $162 billion on
January 17, 2020.4 At the time this article goes to publica-
tion, the market capitalization for Bitcoin is $158 billion.
Incredibly, in the same time frame, the hash rate' increased
from approximately 40 million terahash6 per second to 96
million terahash per second.7 Despite controversy and
criticism, Bitcoin continues to attract new investors and
speculators. During June, 2017, the popular fiat to Bitcoin
exchange, Coinbase, signed up over one million new users
* The George Washington University Law School, Class
of 2019. Counsel for Kalorama Partners LLC, working on
issues of securities regulation and corporate governance.
1. Julie Bort, May 22 Is Bitcoin Pizza Day Thanks to These Two Pizzas Worth
$5 Million Today, Bus. INSIDER (May 21, 2014, 8:26 PM), http://www.
businessinsider.com/may-22-bitcoin-pizza-day-2014-5?IR=T (equating to
roughly $25 in 2010).
2. Adrian Chen, We Need to Know Who Satoshi Nakamoto Is, NEW YORK-
ER (May 9, 2016), https://www.newyorker.com/business/currency/
we-need-to-know-who-satoshi-nakamoto-is.
3. Francesco Canepa, ECB's Constancio Compares Bitcoin to Dutch Tulip Ma-
nia, REUTERS (Sept. 22,2017,11:32AM), https://www.reuters.com/article/
us-ecb-bitcoin-stability/ecbs-constancio-compares-bitcoin-to-dutch-tulip-
mania-idUSKCN 1 BX26C; see, e.g., Seth Archer, There' a Lot to Learn About
Bitcoin From Looking at the Tulip Bulb Bubble (Dec. 8, 2017), https://mar-
kets.businessinsider.com/news/stocks/bitcoin-price-and-tulipmania-have-
a-lot-more-in-common-than-you-might-think-2017-12-1010622704.
4. Bitcoin, COINMARKETCAP, https://coinmarketcap.com/currencies/bitcoin
(last visited Jan. 20, 2020).
5. See What Is Hash Rate?, Coin Rivet, https://coinrivet.com/guides/what-is-
cryptocurrency-mining/ what-is-hash-rate (last visited Feb. 28, 2020).
6. One terahash is one trillion hashes per second. See id.
7. Hash Rate, BLOCKCHAIN, https://blockchain.info/charts/hash-ratetime
span=2years (last visited Nov. 18, 2017).
in a single month.' With this growth comes a variety of
practical problems for scaling the network, including keep-
ing transactions cost-effective and rapid.9
Bitcoin is decentralized and self-governed, but this gov-
ernance model does not regulate Bitcoin's energy consump-
tion. The Bitcoin network has largely focused on scaling
issues, but one element left unanswered is whether the pub-
lic should continue to allow Bitcoin to scale at its current
pace despite massive energy consumption and the associ-
ated costs required to maintain the network.0 A single Bit-
coin transaction could power an estimated 23.07 typical
households in the United States for an entire day. More-
over, at the time of publication, the entire network of Bit-
coin miners is estimated to consume 77.78 terawatt-hours
annually-roughly equivalent to the electricity consump-
tion of Chile, a country of over 19.116 million people.12
Due to Bitcoin's growing energy consumption, the United
States should look at all possible avenues for the regulation
of Bitcoin's rapacious energy utilization.13
Part I of this note will explain how Bitcoin operates,
what Bitcoin mining is, and why it is so energy-intensive.
Part II will explain the legal status of Bitcoin mining in
the United States and internationally. Moreover, it will
detail how the current legal framework is insufficient to
regulate Bitcoin mining in meaningful ways. Part III
discusses how Bitcoin mining might fall under a current
regulatory scheme. Part IV details two potential legal
8. Joseph Young, Bitcoin User Base Surges, Coinbase Adds I Mn Users in I
Month, COINTELEGRAPH (July 3, 2017), https://cointelegraph.com/news/
bitcoin-user-base-surges-coinbase-adds-1 -mln-users-in- 1-month.
9. Andrew Marshall, Bitcoin Scaling Problem, Explained, COINTELE-
GRAPH (Mar. 2, 2017), https://cointelegraph.com/explained/bitcoin-
scaling-problem-explained.
10. Mohit Mamoria, Your Ultimate Guide to the Upcoming Fork That's Split-
ting the Bitcoin Community, TNW (July 24, 2017), https://thenextweb.
com/contributors/2017/07/24/ultimate-guide-upcoming-fork-thats-split-
ting-bitcoin-community (explaining the transaction volume problem and
the adopted solution of increasing block size from 1MB to 2MB).
11. Bitcoin Energy Consumption Index, DIGICONOMIST, https://digiconomist.
net/bitcoin-energy-consumption#assumptions (last visited May 9, 2020)
[https://perma.cc/D3R9-E6S7].
12. This metric does not include the consumption used for cooling the mining
equipment, which represents a whole understudied fact of Bitcoin mining
energy consumption. See id.
13. Bitcoin represents only one of many cryptocurrencies. There are over 1,500
coins listed on coinmarketcap.com, many of them with extensive energy
consumptive networks. However, due to the bleeding-edge nature of these
currencies, there has been little to no data on the energy consumption of
their respective networks. See Bitcoin, supra note 4.
THE GEORGE WASHINGTON JOURNAL OF ENERGY AND ENVIRONMENTAL LAW
32
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