The primary concern lies in the Proof-of-Work consensus mechanism used by cryptocurrencies like Bitcoin. This process involves miners solving mathematical problems to add new blocks to the network resulting in high computational demands.
However, Ethereum's strategic shift in 2022 called 'The Merge' has revolutionized this approach by replacing Proof-of-Work with Proof-of-Stake. PoS relies on cryptocurrency holdings for verification purposes, which significantly reduces energy consumption. The Crypto Carbon Ratings Institute
predicts that Ethereum electricity usage will decrease from 23 million MW hours annually to 2,600 MW hours.
But Bitcoin continues to have an appetite for energy and shows no signs of relenting. A single Bitcoin transaction consumes much energy as an average U.S. Household would in nearly 26 days. However, the network of miners strongly relies on Proof-of-Work as the way to maintain a truly decentralized system.
With the energy crisis becoming more severe the United States is grappling with the consequences of countries banning crypto mining. China, which used to account for up to 75% of mining activity shut down
all cryptocurrency-related operations in 2021 transferring 35% of Bitcoin's computing power to the U.S.
In response to growing concerns measures are being taken to reduce energy consumption and pollution caused by crypto mining.