Indicators

Energy Consumption

Energy consumption refers to the total amount of electricity used for transaction validation and maintaining the integrity of a blockchain ledger. The consumption varies based on the consensus mechanism:

• Proof of Work (PoW) networks (e.g., Bitcoin) require substantial computational power, leading to high energy usage due to mining activities. Specialized mining hardware (ASICs) operates continuously, consuming significant electricity.
• Proof of Stake (PoS) and Proof of Authority (PoA) networks rely on validators rather than intensive computations, resulting in substantially lower energy consumption.
• Energy consumption assessments consider network hashrates, hardware efficiency, and regional electricity prices. Layer 2 solutions, which operate on top of base-layer blockchains, require a separate but related calculation.

Renewable Energy Consumption

This indicator evaluates the share of energy used from renewable sources, expressed as a percentage of the total energy consumed by the blockchain network.

• Identifying miner locations in PoW networks is challenging since mining operations are often undisclosed for competitive reasons. Public filings from mining companies, data from blockchain explorers, and network node mapping help estimate energy sources.
• PoS and PoA networks allow better visibility into node locations, enabling more accurate renewable energy usage estimations.
• The calculation involves matching geographic energy consumption data with local renewable energy grid statistics, accounting for variations in regional electricity sources.

Energy Intensity

Energy intensity measures the average electricity consumption per validated transaction, expressed in kilowatt-hours (kWh). Unlike a simple division of total energy by transaction count, a hybrid approach is used to allocate energy consumption fairly:

• Holding-based allocation: Considers how much energy is used to maintain network security rather than processing transactions. In PoW, miners receive rewards partly based on block subsidies, meaning that currency holders indirectly fund energy consumption.
• Transaction-based allocation: Attributes energy consumption to transactions by dividing total network energy usage by the number of transactions. However, this method can be misleading, as energy is also used to secure the ledger.
• Hybrid allocation: A combination of both approaches, considering factors like mining rewards, transaction fees, and network participation.