Fayaz Ahmed

Blockchain and Energy Consumption Problem

Blog Post created by Fayaz Ahmed Partner on 08-May-2018

Renewable energy technologies are being sought all over the world, whether to shift away from fossil fuels in order to create sustainable future or simply to provide basic electrification for the fifth of the population without access. Energy leaders believe that blockchain technology would be playing key role in making this thing happen.


A blockchain is a secure, transparent and decentralized digital ledger designed for exchanging value/information in a peer-to-peer network. Blockchain technology has already disrupted finance industry in the recent years, by allowing virtual currencies like bitcoins to work efficiently without involving intermediaries or third parties. It has potential to provide additional efficiency and security in future, which could completely disrupt the finance industry. Blockchain is thought to play a pivotal role in transforming many industries but the one which excites me most is its utilization in energy industry, I strongly believe that some wider and more disruptive future awaits.

Consensus algorithm consumes most of the energy required to run the system. Putting into perspective, bitcoin miners consume more energy in a year than many small nations like Denmark do. Different companies are trying to find different ways to reduce energy required reaching consensus within decentralized network. Bitcoin uses permisionless mechanism called proof of work which everyone can join and participate in the network increasing energy consumption because of large number of participants involved end up reaching high level of consensus and trust. However, Etherum often considered as Blockchain 2.0 trying permissioned mechanism called proof of stake where certain players of network would be given rights to update and verify decentralized ledger which lacks in terms of consensus because few players of the network are responsible for updating chains of blocks within the decentralized network which in case of bitcoin would be open for every participant of the peer-to-peer network.


There is no denying the fact that Blockchain has made huge progress in the past several years, but before delegating everything on blockchain a reality check need to be carried out. The most important trade-off in blockchain large scale adoption happens to be scalability versus performance. High energy consumption required for reaching consensus within the network hinders its scalability, switching from proof of work to proof of stake consensus mechanism does reduce the consumption of energy required for reaching consensus but scaling poorly in consensus terms.


Solving the classic performance-scalability trade-off would be major milestone for its massive adoption by many industries. Until then, let’s focus on out of the box use case adoption and appropriate platform selection to maximize results and energy efficiency.


#blockchain blockchain1.0 Grzegorz Bytniewski