The energy consumption and efficiency of the underlying technology should be considered when developing a blockchain infrastructure, a EU Blockchain Observatory and Forum report recommends.
As the use of blockchain is growing across the various sectors of the economy – including the energy sector – debate continues around the energy consumption of the different technologies and particularly the headline grabbing high energy consumption of Bitcoin.
Bitcoin’s energy consumption results from the extensive computational power required for mining, which derives from its proof-of-work (PoW) consensus. Other consensus mechanisms such as the popular proof-of-stake are much less energy intensive, although a recent investigation has found that even among these the consumption can vary by several orders of magnitude.
While the consensus mechanism has been considered as the main indicator of the energy consumption, a new report from the European blockchain monitoring body the EU Blockchain Observatory and Forum suggests that two other components should be considered – the redundant computation and storage associated with the blockchain’s operations and the idle energy consumption of each node on the network.
In the case of PoW blockchains, the consensus mechanism bears the lion’s share of the responsibility for the energy consumption. However, for non-PoW blockchains, the nodes’ idle consumption and redundant processing of transactions represent the main share of energy consumption, with both influenced by the number of nodes.
The report also suggests that contrary to common opinion, the energy consumption of PoW blockchains does not grow significantly when the number of transactions or the complexity of operations increases. Thus, in the case of Bitcoin, the biggest threat of increasing energy consumption is a further considerable increase in its price, an increase in transaction fees or a decrease in electricity prices.
Energy Web Chain
As an energy consumption case study, the report reviews the Energy Web Chain, which is based on a permissioned proof-of-authority consensus mechanism via a pool of known and trusted computers – the validator nodes – that are responsible for validating transactions and creating blocks.
Based on an estimated consumption of between 50W and 150W of power at all times, at the top end of the estimate EW Chain’s power draw is about 7.5kW, which is less than half of a millionth of that of Bitcoin.
The report adds that measurements of EW Chain nodes over time suggest that power consumption is relatively constant, regardless of whether the blockchain is under heavy or light load. However, the power requirements may slowly grow over time as the stored data grows, more validators join the network and transactions become more computationally intensive.
Considering the decentralised apps running on EW Chain, with proper use of digital identifiers and the surrounding suite of EW Utility Layer Services, the EW Chain could support hundreds of millions of devices and applications, the report suggests.
Energy efficiency recommendations
Among its recommendations including energy transparency, the report says that blockchain solutions based on the PoW consensus mechanisms should be avoided due to their significantly higher energy consumption compared to other consensus protocols. Limiting the number of validators also can be a way of providing the necessary trust and performance while preserving energy efficiency.
Another recommendation is that scalability and performance should be considered in the energy efficiency of solutions. It is quite common that energy consumption increases exponentially when applications move from the proof-of-concept phase into production.
Scalability and performance are closely related to the type of the underlying consensus mechanism in use and to meet the necessary performance needed by specific applications, a limited number of validators may be considered.
The report also notes that renewable energy is used to the maximum possible extent to cover the demand for energy in blockchain applications and that a blockchain energy consumption index should be developed for the region.