The process of creating Bitcoin consumes around 96 terawatt-hours of electricity every year. It is more electricity than what a small country will consume in a year. The electricity consumption goes up several times in the last five years.

The reason for such heavy consumption is the computing power it requires.

Imagine a bitcoin transaction. An exchange is approached to purchase bitcoin with fiat currency. The transaction must be first validated by the Bitcoin network to receive the authentic bitcoin. It goes to the very heart of Bitcoin book-keeping system — the decentralised blockchain ledger. The system is maintained by using large amount of electric power.

Companies and miners (individuals) validate transactions and enter them in public ledger (which keeps account of all bitcoin transactions). There is guesswork here, and there is competition amongst them. If they succeed, they are rewarded with a freshly minded Bitcoin. Mining is thus a competition for newly created Bitcoin. There is no advanced math or computation involved. You have to be the first miner to come up with a 64-digit hexadecimal number called a hash that is less than or equal to the target hash. Thus essentially it is guesswork. The more is your computing power, the more guesses you make rapidly.

Bitcoin miners therefore run warehouses equipped with powerful computers running at great speed to guess big numbers. Thus they use great amount of electricity. The one who comes at the top of the guessing game validates a standard block of 6.25 newly minted Bitcoins.

Initially, just one computer at home was enough for mining. Currently, you require a sophisticated set-up of powerful computers housed in big space, and powered by endless stream of electric power. There is cooling system to take care of the overheated hardware system. Mining is done by huge data centres. There are hardly half a dozen such centres now who do most of the mining.

Though mining is spread across the world, majority of it happened in China, say 75 per cent, which after recent crackdown has reduced to 46 per cent. Consequently, mining in the US has gone up from 4 per cent to 16 per cent.

As environmental criticism mounts, Bitcoin miners look at nuclear power for clean energy generation. Though this possibility could be years away, it could be a way out in future. Crypto miners use vast amount of computing power and energy to verify transactions on the blockchain (decentralised ledger) that underpins the digital token. Reactors are small and generate a lot of power without harmful emissions.